Despite the shadow of uncertainty Covid-19 has cast over the Australian business sector, one thing we can be sure of is that when we do emerge on the other side there will be both winners and losers. While some will founder, others will flourish. Which camp your business falls into will depend on your ability to both adapt and build operational excellence.
Sure, there are still stormy seas to navigate, but it is possible for savvy businesses to not only survive but thrive in the current climate.-19
Resilience through Operational Excellence
So, how can we make our businesses stronger while reacting to the wide-ranging impacts of Covid-19?
It seems a tall order, but it is possible. As we scramble to address the challenges Covid-19 poses to our businesses, it’s inevitable for most that profits will take a hit. This is a threat to the very lifeblood of our business. Profit must be protected. So, without profit we don’t have a business, we have a liability.
Profit is the result of a simple calculation, but it’s worth thinking about when plotting a course through Covid-19.
Profit = revenue - costs
With this in mind, it stands to reason that there are only two ways to increase the profitability of your company.
1. Increase revenue
2. Reduce costs
As a result, the reality of the current economic climate means increasing revenue is simply not possible for many. So, to protect our profit margins, we need to find ways to reduce costs.
The first way to do this is to cut non-essential purchases and reduce overheads. This could include standing down staff or reducing staff hours. But once we’ve been through and trimmed the fat from payroll, what then?
Many businesses start and finish there.
Operational Excellence Seeks Permanent (Not Just Temporary) Cost Reduction
The best businesses, however, go further and use a crisis to focus their teams on achieving further permanent savings.
The next questions that need to be asked are…
1. How can we take cost out of our products?
2. Where are we leaking costs operationally? No-one’s perfect right? So there has to be savings made
3. Are there cheaper, faster ways of doing the same job?
If you can inspire your teams to identify opportunities, come up with solutions and implement quick changes, you’re developing some pretty valuable capabilities.
How to find Lean Cost Reduction Ideas
When hunting out cost savings there is often low-hanging fruit to be found. Applying Lean thinking and Operational Excellence principles to your organisation will produce a wealth of productivity improvement and cost reduction initiatives.
So, you can get the ball rolling with a simple ‘waste walk’ of your operations to identify the nine deadly wastes. Use the acronym WOODMITS + 1 to remember them all.
W - Waiting
O - Over Production
O - Over Processing
D - Defects
M - Motion
I - Inventory
T - Transport
S - Space
+1 - People's knowledge and/or creativity
Now, if you want to take things a step further, you could carry out a Value Stream Mapping exercise of your end to end operations.
Whichever method you choose, there should be no shortage of lean cost reduction or productivity improvement ideas.
Although, one word of caution, not all improvement ideas are created equal. Before you get started, do a quick return-on-investment calculation on each initiative and implement the ideas with the fastest pay back, first.
Firstly, if it’s done well the act of strengthening your business against external threats can remove costs permanently and secondly leave your staff fitter for change and more capable to react to changing circumstances.
So, to summarise…
In these times, we must protect profit.
Reducing costs is likely the best way to achieve this.
Don't just look at temporary cost offsets and savings, engage your teams on permanent cost reductions. You'll be better off for it.
Looking to accelerate your operational excellence journey?
Then get in touch to book a 20 min Discovery Chat and we'll talk through what things can be done to deliver results faster.