Peeling the Cost Onion:
Filed under: Cost ReductionSep 15th, 2009 | no responses
Cost Reduction can be analogous to “peeling an onion” in the sense of looking at cost in layers. Since all costs ultimately get “rolled into” the product bill (yes, even the CEO’s salary), it is important to identify and eliminate any unnecessary cost whether it’s coming from materials, manpower, machines, methods, or measurement….the 5 M’s.
Layer 1 of the Cost Onion consists of: idle labor, idel machines, unused capacity.
Layer 2 is: inefficient methods, poor or lack of standards
Layer 3 is: needless complexity, tolerances unnecessarily tight, product overdesigned
Layer 4 is: expensive labor, materials, machines and overhead
Layer 5 is: waste of overproduction, inventory, transportation, motion, extra processing, waiting, defects, and underutilized people.
Like almost all examples, it’s somewhat easier to peel the first layer, but as you get closer to the core it becomes more and more difficult. This is certainly true of costs.
We have a workshop process to enable you to thoroughly examine each of these “Cost Layers” in order to dramatically reduce each of them.
JCM Work Designs/The Lean Sigma Team can design and conduct this workshop to meet your specific needs. Please contact us for a formal proposal.
