Selecting the right buttons to push can be a complex process to begin with, but once the initial analysis is complete, a clear and comprehensive plan will show you the path to follow. We make use of the
Basic Cash Loss Evaluation ©, which is a highly focused analytical tool able to extract significant cost drivers in the business and couple them with meaningful improvement projects. This takes the mystery out of how and where to improve in the short, medium and long term, and will certainly help in prioritising where to focus all the effort and scarce resources. You can start by asking yourself the following questions:
- Does our organisation have high-level goals for cost reduction? For e.g. the business goal is to reduce working capital by 18% in the coming year.
- Do we have business objectives to help us achieve these goals? For e.g. to achieve the working capital reduction, it is clear we need to:
- Reduce the cash-cash cycle by 27 days.
- Reduce expenditure by 25%.
- Cut down inventory holding (responsibly) by R20million.
- Do we understand the cost drivers sitting behind each of these objectives? For e.g.:
- Cash-cash cycle is driven by debtors days, creditors days and lead time to deliver.
- Have we evaluated the unnecessary and avoidable losses affecting these cost drivers that should be targeted for improvement?
- Can we financially quantify the impact each improvement project will have on these cost drivers? Have we prioritised them?
- Does our measurement system for each project help create the link between improvement effort and bottom line impact?
It makes sense to have the right team involved in this evaluation, to grow ownership for each project and ensure the development and learning is taking place. Select individuals with the right decision making power and level of control and help them discover how they can turn improvement effort into results.
Contact us should you require more information.