Costs to be Reduced ...
There are four basic categories of costs that are candidates for reduction:
Materials (components & supplies) which are used to replicate the product
Processes ( doctrines & procedures) which are used to create, produce, verify, distribute and support the product
Requirements (functional, regulatory, legal, corporate, brotherhoods) which are required to be designed or ‘ costed’ into the product
Resources (human, knowledge, equipment & facilities) which implement the above three categories.
As discussed, the human resource issues are not considered in this article.
The Meat ...
So ... How do all of these canons, scenarios, cycles and categories fit together to generate an effective cost reduction process and plan ... and how can it be sold to non-believers?
The following implementation tips will help set up the corporate arena for applying the 10 Canons:
The first step is to discover or anoint a corporate ‘champion’: one who is adamant that a cost reduction program should at least be investigated if not implemented. Bestow this person with the appropriate corporate support and access to carry the investigation to its conclusion.
The second step is to ask (and answer) why a cost reduction program needs to be done; then determine what is to be accomplished by the program. Discovering these answers and issues must lead to corporate goals.
Create a team (including the Champion who started the whole thing) with the credibility and influence to execute the plan. The team needs to contain these functional entities: a leader/champion (ownership of the process, resource manager, spokesman, moderator and monitor), a coach (knowledgeable, to encourage, to challenge, to impel); an independent (objective, questioning, advisor). Outline responsibilities, authority and what is to be expected of each member, explicitly!
Even though analysis is needed, it is very important to embrace the KISS principle from the beginning of the effort. A cost reduction program can become bogged down in time & resource paucity, politics, ambivalence and paralysis-by-analysis should it become overly complex. Also, the ‘gut feel’ and ‘quick fix’ are important sources of information and motivation, but they should always be checked by objective analysis. |
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© R. M. Haney, 1997
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