Reduce Costs Not Margin

Higher costs are one of the most frustrating aspects of any business. Many organizations implement various programs in their facilities to reduce costs but ultimately end up harming the process (and thereby margins) rather than just costs. In this fast-moving industrial world, it is important for one to control their costs to grow and move ahead in the chain. Team Faber Infinite delivered an extremely powerful and unique workshop connecting operations and finance at Auto Component Manufacturers Association (ACMA) of India.

It is always difficult for a finance manager to attribute how operational excellence practices will help save money and will be thus reflected in the profit and loss statement. Every organization works on different processes and there is always a possibility to eliminate waste in the process. With this approach, Team Faber made the teams understand that waste and price both can be reduced thus increasing the profitability of the organization.

Cost reduction in any organization can happen in different forms:

  • Reduction (production time, waiting, inventory)
  • Elimination (wastes, bottlenecks, barriers)
  • Modification (systems, designs)
  • Innovation (equipment, tooling, methods, materials)

Traditionally it was common for organizations to achieve higher profits by increasing sales. On the other hand, organizations that follow a lean approach they work on improving the profits by reducing costs.

Organizations should focus on improvements in the organization such that they eliminate non-value adding activities or eliminate waste/ inefficiencies. When we say waste it means any activity that adds costs or time but does not add value.

Working on the following wastes or inefficiencies or Muda – Overproduction, Waiting, Transportation, Excess/ Improper processing, Inventory, Defects, Motion and Unutilized Human Potential using operational excellence tools and techniques, organizations reduce costs and thus improve margins. As a part of the workshop, Team Faber explained the different tools and techniques that can be used to achieve operational excellence and thus cut the fat in the process and build the muscles.

Here’s how we can help you in cost reduction

Team Faber Infinite has formulated various structured frameworks that have proven to be highly efficient and effective in the practical implementation of Operational Excellence and related tools. Our structured frameworks make sure that the operational excellence journey rolls out a holistic approach towards every aspect of the manufacturing and management processes.

Many might misunderstand that generating revenue alone increases profits. However, this is not entirely true. Profits can never be achieved just by working on the top line. It is extremely important for the manufacturer to constantly brush up the lower half of the hierarchy as well. There are many wastes that impact the manufacturing processes and tends to reduce the profitability of the organization. Controlling costs incurring at the initial stages is a turning point in the journey towards cost reduction.

Operational excellence turns out to be a perfect solution to this since it consistently looks up the entire manufacturing process and relative aspects involved in the business. Team Faber Infinite has been a strong supporter of Operational excellence and our solutions are designed to deliver exceptional results to our clients. This solution includes integrating finances with operations to make the finance managers sensitive to the wastes incurring costs on the finances and thus, charting a way out for them to attain a greener patch in their journey.

Capital is an important resource that moulds the shape of an organization. Hence, cost efficiency is one of the key aspects organizations need to work in order to have better outputs, both from the management as well as the production side. Also, while reducing costs, one must implement the management programs in such a manner that it does not affect their profits and margins. Team Faber Infinite has helped many companies in successfully implementing various programs that have helped them in reducing their costs dramatically. This has ultimately helped them in improving the profits as well.

Written & Compiled By Faber Kishlay & Faber Mayuri

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