The Untapped Profit in Process Waste
Most small businesses have little to no clue, concerning the amount of untapped profit in process waste that’s all around them. Unfortunately, tapping into process inefficiencies and fine-tuning them systematically is foreign to most business owners.
The reason is simple; they have NO tracking-and-reporting mechanism!
Not surprisingly, very few small businesses can verify the amount of money and time lost to waste each month, caused by employee mistakes and other types of waste due to process inefficiencies.
The fact is, waste in most businesses is MUCH more than most owners realize. Again, with NO tracking and NO reporting mechanism, they have NO IDEA of the amount.
Regardless of that reality, business owners often claim their waste is quite manageable; that they make a decent profit despite waste. Therefore, they say, there’s no need to change or invest in waste-reporting solutions. Yet, at their fingertips are ready-to-go solutions that would pay for themselves!!
We can only assume by their assertions; more profit is not worth their effort or investment.
Finding and Recovering Untapped Profit
Thank goodness, we didn’t buy into “business waste is normal,” nor accept it!
In the early 1990s, errors and miscommunications, due to our poor process systems, was annoying to us. We needed a FIX for that. So, we developed a waste-tracking-and-reporting system for our small manufacturing business. At that time, we had less than 10 employees.
When the “fix” was implemented, we were shocked to find we had MUCH more waste than we assumed. In fact, when pulling our first waste report, we discovered over 10% waste, in ratio to our overall sales. Armed with that information, we quickly implemented controls to tap into that VERIFIED lost profit. Imagine, lowering waste from 10% to 2%.
We did that, and more!
Consider the positive impact of adding 8% to the bottom-line of a small business. For instance, a small business with two million dollars per year in sales would add One Hundred Sixty THOUSAND Dollars ($160,000) each year in more profits.
Do I have your attention?
That can buy a lot of toys — a lot of needed maintenance and equipment upgrades — for such a small investment in a waste tracking system.
The truth is, not only did our Waste Reporting System reveal WHERE our waste was occurring; it revealed WHICH employees were responsible for most of the waste. Another eye-opening moment!
Seeing is believing! When explaining to employees WHY the implementation of certain control processes is necessary, for recovering untapped profit, the result will be employee buy-in.
Did I mention? Great systems work and pay for themselves!
Philip Beyer, founder/president of Ebiz Products LLC and founder of Beyer Printing Inc. in Nashville Tenn., is a chronic entrepreneur, business systems analyst and consultant. Author of "System Busters: How to Stop Them in Your Business" and recipient of an InterTech Technology Award for the design and development of System100 business process management software. Beyer speaks to business owners across the country on how to bring lean, sustainable order to their businesses. Contact him at (615) 425-2652.