5 Steps to Identifying and Implementing Cost Savings

5 Steps to Identifying and Implementing Cost Savings

Improving your supply chain network and reducing your costs is a key target for every business and supply chain professional. But change is difficult and downright impossible when you are managing a dynamic, complex and ever changing world. From Acts of God, to weather, accidents, or other supply chain disruptions, managing your supply chain is as complicated as it gets.

So how do you make cost reduction happen and manage core business activities at the same time? You use these 5 steps as part of your day to day management practice. Embedding a change system in your organization takes some time initially, but once it’s there the results can be incredible. This system works for error elimination, change management, project management, and continuous improvement activities. It creates team alignment and ensures that communication is carefully and purposefully designed to achieve the best possible results.


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Step 1 – Create a Team of Passionate People Who Want to Improve

The first step in the process is to create a team of people that represent the key stakeholders within your organization. These people represent all levels of the organization, from the executive team to the front-lines. They have different perspectives and backgrounds. They react differently to change – but all of them are open to change. This is not the place for those who are unwilling or unable to change – you’ll bring those folks in later.

Hold a kick-off meeting with this group, and set your expectations. Why are they here? What are you doing? Why do you think things need to change? What are the outcomes of this meeting and ultimately the project? Outline the broad strategy, and then be as detailed as possible on the expected results.  This shared communication creates the foundation for an aligned focused team, which facilitates conversation about the “how you get there” later on. Make sure that it’s clear that failure to move forward is not an option. Improvement, no matter how small will be celebrated!!! 

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Step 2 – Create a Common Understanding of the Problem

The second step is to bring the key stakeholders together and focus on the business process that you want to improve. Walk through every detailed step of the process, identifying who is responsible for each step – and most importantly what all the barriers, biases, and issues are throughout that process.  Identify the (RACI) Responsible, Accountable, Consult and Inform stakeholders are. Who needs to know what and when do they need to know it? Why do they need to know? What aspects of this process are critical to upstream and downstream stakeholders?

Capture the list of opportunities, there will be many!!!

Step 3 – Understand the Root Cause of the “Opportunities”

Every issue, bias, barrier, or problem that gets brought up is an opportunity to improve. Take the time through dialog to understand fully why the issues are happening, and what the impacts are to the team. Even if it’s small, 10 minutes of time, 5 days a week x 52 weeks for a $20 employee is almost $1,000.00 a year.  (10/60*5*52*20 = $866).  Add that up across your employees, your network – I’m sure you could do more value added work with that time!!

Brainstorm multiple solutions to each of the issues. Discuss the quality of the solutions and pick the one that has the most consensus and buy-in. Even if the solution is not perfect, the idea is to try something and make adjustments as it's implemented. Don't wait for the stars to align, get moving!

Step 4 – Prioritize the Opportunities by Size of the Prize

Take the opportunities list and estimate the size of each opportunity to the organization. Use quick calculation methods like the one in Step 3. Highlight all the quick wins, the easy wins and prioritize them against the amount of money that can be saved. The easier the implementation and the higher the cost savings, the higher the initiative is on the list of priorities.

Step 5 – Develop Your Implementation Plan

Create smaller teams that are more focused on each opportunity. Ensure that each team has a representative from the groups that would be affected by the improvement project. Create a detailed project plan and communication plan. Keep it simple. Your project plan can be an A3 (used in Lean) or a simple excel spreadsheet that has the task, who, what, and when. To achieve quick wins, focus more on action than administration. Fill out and actively use a communication plan. Spending the time to understand the messages needed for key players is critical to achieving progress. Track progress no matter how small, every conversation, every step toward the broader goal is something to celebrate and recognize. 

Continue going through the process at regular intervals to assess, measure, re-define, and re-focus the project teams as they move forward. Bring the larger group together regularly to talk about progress, issues, and CELEBRATE!

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