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Cost reduction process and projects

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  • 1. Cost Reduction Process and Project MGT 603 Koichi Tachiya
  • 2. Points Describing the Organization • Business in Japan, South Korea, Taiwan, and Thailand. • 300 workers. • Located in Fukushima, which has a broken nuclear power plant. • Purchased a machine that checks contamination on its products, so it sells only safe food.
  • 3. An Initial Problem The company lost some facilities and some equipment by tsunami, so the cost reduction is necessary for the company to start increasing its capacity. I recommend implementing some process and projects to reduces $129,520/year. The company will decrease the costs and increase its capacity, performance of workers and sales eventually. Operations issue Unnecessary activities on services are implemented, but necessary activities are not implemented in their operation system for a long while.
  • 4. Analyze by a fishbone diagram Customer Satisfaction Products Inventory Forecast Receiving Order Safety Services Email Website TV commercial Social Media What needs correction • Customer services that explain the products are safe. • Introducing technologies: email, website and social medias. • Cancel the TV commercial • Hiring or outsourcing workers who can develop and manage a website and social medias.
  • 5. Financial Comparison Before earthquake and tsunami(2010) Sales $2,000,000 Amounts of Returns $2,000 Ratio of Them 0.001 After earthquake and tsunami(2012) Sales $1,100,000 Amounts of Returns $15,000 Ratio of Them 0.013 All products have been safe, but the sales are affected by word of mouth, and weak customer service. Therefore, when the quality of customer service improves, the sales also increase and amounts of returns decrease.
  • 6. Question How do you eliminate costs? Process Seven Service Quality Factors Project Canceling TV commercial Building a website and social medias Stopping international call Decreasing # of business trips Using Skype for calling and meeting
  • 7. Seven Service Quality Factors “Improving quality means reducing costs” (Dr. W. Edwards) • Reliability: data of contamination. • Responsiveness: willingness to assist customers. • Competence: knowledge and skills of customer service. • Access: the ease of contacting the company. • Courtesy: politeness, respect and friendliness • Communication: languages such as Korean and English. • Credibility: the companies' trustworthiness, believability and honesty.
  • 8. Service Blueprint Customer Service Meetings Meetings Overseas International Call TV Commercial Guidelines/Strategies Visible by customers Invisible by customers $12,900 /year$46,620/Year $70,000/year Total costs: $129,520/year can be reduced
  • 9. Costs of business trips overseas Expenses Costs par month Transportations $1,200 Hotel $1,800 Social Expenses $1,170 Labor $3,600 Total Costs $7,7000/month $46,620/6monthes $93,240/year
  • 10. Costs Reduction on Service 6workers × $2 × 45min = $540/month $540 × 12 months = $6450/year That costs are charged to both, so $6450 × 2 people = $12,900 /year Therefore, I recommend using Skype because it is free # of workers who call from Japan to Korea. 6 workers Cost of calling from Japan to Korea. is$2/min The average time of calling by each workers. 45 minutes/month.
  • 11. TV Commercial vs. Website TV Commercial Website •TV commercial is not really measurable, so we cannot calculate its effectiveness exactly. •Website has more information and data. TV commercial has just 15 seconds. •The company generates $12,900/year by canceling the TV commercial, so it can introduce a website that costs $1,000 as a production fee and $50 per month for maintaining.
  • 12. Schedule 9/16/13 Mon 9/12 Thu 9/12 Thu 9/23 Mon Canceling TV commercial Adding coworkers’ Skype IDs and Skype IDs for the virtual meeting Deciding which meeting style should be used for the next month meeting Building a website by outsourcing 9/27 Fri 10/1 Tue 12/23 Mon 12/27 Fri Decide participants of improving service quality factors (SQF) First meeting for SQF (Every Tuesday) Completion date of the website Evaluation for the calling and virtual meeting by Skype 2/3/14 Mon 3/28 Fri 5/5 Mon 6/27 Fri Evaluation the website and SQF Evaluation for the calling and virtual meeting by Skype Evaluation and adjust the website and SQF Evaluation/adjust the calling and virtual meeting by Skype 8/4 Mon 9/26 Fri 11/3 Mon 12/26 Fri Evaluation and adjust the website and SQF Evaluation/adjust the calling and virtual meeting by Skype Evaluation and adjust the website and SQF Evaluation/adjust the calling and virtual meeting by Skype
  • 13. Recommendations • Introduce email, website and social medias to inform reliable data about contamination, and to be easily accessed by customers. • Reduce costs: $70,000/year by canceling TV commercial because website is better than TV commercial on cost effectiveness. • improve the seven service quality factors to reduce costs of customer service in the long term. • Reduce costs: international calling by $12,900/year. • Reduce costs: unnecessary business trips: $46,620/year. • Total costs that the company can reduces are $129,520/year