Improve Your Business (Part 3) – Value of Waste
Waste Elimination – Understanding what TIM WOODS is Costing YOU
In our last Newsletter, we introduced the concept of waste and that this exists in every business. If you are to be competitive by delivering a product or service which the consumer or customers are prepared to pay for while ensuring the organisation makes money, you have to focus on the cost of production or service. We used the acronym TIM WOODS to facilitate the easy remembering of the many different forms of waste.
In this newsletter I will use examples to try and illustrate how much TIM WOODS is costing your business. The examples have been made up, but hopefully they are close enough to reality that it gives you impetus to calculate the cost of some of your waste and provide the stimulus to drive TIM WOODS out of your business so he can take up residence somewhere else.
You operate an Allied Health business and a new customer or client comes to receive a service. They are requested to complete a form with all the details required. Things like name and address, Medicare number, Allergies, Next of Kin etc. This is then entered into the business’s IT system, however, because other Government Agencies could be involved such as Medicare, NDIS, Health Insurance, Workcover etc. this information may have to be entered in two or more systems. If you have one new client per day and it takes 10 minutes to enter the data into one additional system, then the additional cost to you for this duplicate entry is 2400 minutes per annum. If you pay the receptionist $20 per hour then with on costs of 30% (Super, Annual leave, Long service, Sick Leave, Work Cover, Payroll Tax etc) the true cost to you is $26 per hour. This equates to $1040 pa of non-valuing activity or Transport waste. If your IT systems can be configured so it only requires data to be entered once then these saving accumulate, reduce data entry errors and allow the receptionist to do other value adding activities.
You operate a nursery and are picking orders for your customers. Because the nursery is constantly changing as the plants grow and are moved around, the Picking Slip is not printed in the most efficient route around the nursery. This means the pickers move randomly around as they pick their orders. They prefer to pick each line item as printed to avoid missing any lines, ensuring the customer gets what they want. However, this then increases the movement time by 30 seconds per line item. On average there are 8 line items per order and average 50 orders are picked each weekday. The increase in picking time is 4 minutes per order, or 48,000 minutes per year. Assuming Order Pickers are paid $17 per hour plus on-costs of 30% results in $17,840 pa in non-value adding Movement Waste.
Ineffective meetings are considered Over Production. This is because ineffective meetings don’t have any real or tangible outcomes, a bit like products that don’t have any sales. How many times have you been to a meeting and came away and said, “that was a waste of time, nothing got decided I don’t know why I went”. If 8 people went to a 1 hour meeting with an average pay rate of $35 per hour plus on costs. The cost of the 1 hour meeting is $364. If you attend 50 of these meetings per year then the organisation has spent $18,200 in non-valuing adding Over Production waste.
As you can see small amounts of time accumulate over the year and if removed can result in significant savings. Lean Thinking is about identifying these different forms of waste, finding where TIM WOODS is residing and developing plans to eliminate them, getting TIM to move on.
The Business Advisors at Workplace Partners have been trained in identifying TIM WOODS and helping you develop plans to eliminate him so your team are concentrating on creating value for your orgnaisation, enabling you to be more competitive and profitable.
If you want any help then please contact us on 1300 116 400 or [email protected]placepartners.com.au
Article by Grant Winter