Productivity Improvement Strategy for Controlling Costs - SYSPRO Canada

Productivity Improvement Strategy for Controlling Costs

Productivity Improvement Strategy for Controlling Costs for Canadian Manufacturers

How to Identify and Address the Hidden Costs in Manufacturing for CFOs and Finance Leaders

The most common business challenge facing Canadian manufacturers is identifying how to eliminate unnecessary spending and reduce lost revenue. Today’s higher operational costs, increasingly complex supply chains, and rising compliance expenditures make facing up to this challenge critical for business success. The solution is to implement a productivity improvement strategy.

The challenges facing Canadian manufacturing leaders

Today’s COOs are expected to deliver on operational excellence, while CFOs are being challenged to ensure their organizations have a strong financial foundation. They both face similar challenges and need to find answers to three key questions in particular:

  1. What are the opportunity costs of not identifying and addressing hidden costs?
  2. What are the costs and key challenges of addressing the Status Quo?
  3. How can we build sustainable business processes to help achieve our strategic goals and boost cost-savings?

The cost of doing nothing

When determining if they are maximizing performance and profitability, or struggling with on-going waste and loss, CFOs and COOs must consider hidden costs. Key areas of inefficiencies include:

  • Purchasing: Purchasing processes that are not streamlined result in reactive and manual purchasing decisions. Manufacturers spend time and money expediting purchases due to last minute ordering.
  • Inventory: Poor supply chain visibility, along with poor purchasing processes, can result in too much inventory and the wrong kind of inventory. Fewer turns of inventory also result in higher costs.
  • Sales fulfillment: When customers’ demands are not met due to inventory and purchasing issues, fulfilling sales orders becomes inefficient. This results in reduced revenue and unhappy customers.

Common obstacles and considerations for a productivity improvement strategy

Manufacturing leaders typically face three key challenges when trying to implement a productivity improvement strategy:

  1. Inefficient communication: Organization-wide anxiety and resistance to change can result in poor communication across different levels of the business.
  2. Lack of stakeholder alignment: Meaningful change can only occur when all stakeholders are aware of the goals. Poor stakeholder alignment often results in a failure to achieve the strategic vision.
  3. Lack of cultural synergy: Without implementing a strategy aimed at bringing together all stakeholders, it’s difficult to create an environment that is primed for sustainable success.

The benefits of tackling the Status Quo

Despite these challenges, the cost of “business as usual” is greater. Taking a streamlined approach to productivity improvement and realizing lost dollars in manufacturing will help:

  • Purchasing: Purchasing processes become more proactive and efficient. This reduces redundancy and the costs involved in last minute ordering.
  • Inventory: Inventory processes become less about guesswork and more about stocking up on the goods and services that customers want. This also helps decrease cycle time and process conflict while resulting in higher turns.
  • Sales fulfillment: Sales fulfillment processes become efficient and profitable. With increased consistency, manufacturers can provide reliable results to customers. This in turn boosts brand trust and reputation.

How to create a roadmap for sustainable success for productivity improvement strategies

Business process innovation is the best option for sustainable success. This involves taking advantage of modern productivity improvement techniques, including taking into account technology needs.

There are three crucial things manufacturers can do now:

  1. Follow a straightforward approach and methodology: The Define, Measure, Analyze, Improve, Control (DMAIC) model helps improve existing systems and processes and avoid revenue wastage. It enables the creation of action plans to begin reducing waste almost immediately.
  2. Focus on the vision for your people, processes and technology: Deliver a roadmap to align business processes with the business strategy and vision.
  3. Manage change by including staff resources: Change management is a critical success factor. Enabling a hands-on approach helps staff feel included, and means everyone understands the importance of realizing lost dollars.

Canadian manufacturers that know how to identify hidden costs in their organizations and how to implement successful long-term change, in order to gain a significant competitive advantage.

If you want to learn about productivity improvement strategies to help control costs for CFOs, download your complimentary eBook, WHAT CFOs (AND FINANCE LEADERS) NEED TO KNOW ABOUT REALIZING LOST DOLLARS ON THEIR ORGANIZATIONS—AND WHY THEY NEED TO ACT TODAY, by filling in the form on this page.