SlideShare a Scribd company logo
John McClune
Productivity Improvement Team
Cost & Cost Reduction Principle
SALESPRICE
Profit
Cost
Profit = Price – (OE +VA + NVA)
Value added work = customer is willing to pay for.
To increase profits costs must be reduced
Reduce
What costs are totally within your control?
A Different Approach: Thinking Lean!
• A way of working that eliminates waste & creates
continuous flow in a value stream to deliver
improved value and service, based on identified
customer requirements.
Lead Time
(time to deliver product / service to customer)
Typically up to 90% of all lead time
can be non-value added
Wrong
materials Queue / Wait
Time
Errors /
Rework
Equipment
unavailable
Batching /
end of period
Inadequate
Resource
Changes
T - Transport
I - Inventory
M - Motion
W - Waiting
O - Over production
O - Over processing
D - Defects - Rework
S - Skills (unused)
The Eight Wastes.
MOVE IT OVER
THERE UNTIL
WE NEED IT
Transport
DefectsOver processing
Over productionWaiting
MotionInventory
Skills
Productivity Improvement Team
• Experienced practitioners to deliver quantifiable productivity
improvements.
• Train, facilitate, mentor, advise and provide on-site support.
Improvement Opportunity Typical Improvement
Productivity 25%
Scrap / Defects 25%
Cycle Time 30%
Turnover 25%+
Client Issues Improvements
Gen Manufacturing
69 employees
Plant at max capacity & costs increasing; long
lead times; high stock levels; poor quality.
Throughput 50% (1000 to 1500 units /
week); improved TO & profit; Defects14%
Food & Drink
7 employees
Packing taking too long & at capacity; stock-
outs; late deliveries.
OTD 10%
Throughput 25% (£425K)
Printing
22 employees
Plant at capacity & high costs; long setup
times; stock levels increased & poor quality.
Throughput 20%; Lead Time 30%;
Quality 90% to 95%
Support a range of sectors from small to large
What Next ? InvestNI Client?
Contact Client Executive /
bisinfo@investni.com &
request lean support
Lean Fundamentals
Training
Lean Advisor Assigned
Scope a project.
1:1 support
Check the websites:
boostingbusinessni.com
nibusinessinfo.co.uk
Y N
Further advice email :
bisinfo@investni.com
Local support
e.g. Council websites
Request support on your
evaluation form

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  • 2. Cost & Cost Reduction Principle SALESPRICE Profit Cost Profit = Price – (OE +VA + NVA) Value added work = customer is willing to pay for. To increase profits costs must be reduced Reduce What costs are totally within your control?
  • 3. A Different Approach: Thinking Lean! • A way of working that eliminates waste & creates continuous flow in a value stream to deliver improved value and service, based on identified customer requirements. Lead Time (time to deliver product / service to customer) Typically up to 90% of all lead time can be non-value added Wrong materials Queue / Wait Time Errors / Rework Equipment unavailable Batching / end of period Inadequate Resource Changes
  • 4. T - Transport I - Inventory M - Motion W - Waiting O - Over production O - Over processing D - Defects - Rework S - Skills (unused) The Eight Wastes. MOVE IT OVER THERE UNTIL WE NEED IT Transport DefectsOver processing Over productionWaiting MotionInventory Skills
  • 5.
  • 6. Productivity Improvement Team • Experienced practitioners to deliver quantifiable productivity improvements. • Train, facilitate, mentor, advise and provide on-site support. Improvement Opportunity Typical Improvement Productivity 25% Scrap / Defects 25% Cycle Time 30% Turnover 25%+ Client Issues Improvements Gen Manufacturing 69 employees Plant at max capacity & costs increasing; long lead times; high stock levels; poor quality. Throughput 50% (1000 to 1500 units / week); improved TO & profit; Defects14% Food & Drink 7 employees Packing taking too long & at capacity; stock- outs; late deliveries. OTD 10% Throughput 25% (£425K) Printing 22 employees Plant at capacity & high costs; long setup times; stock levels increased & poor quality. Throughput 20%; Lead Time 30%; Quality 90% to 95% Support a range of sectors from small to large
  • 7. What Next ? InvestNI Client? Contact Client Executive / bisinfo@investni.com & request lean support Lean Fundamentals Training Lean Advisor Assigned Scope a project. 1:1 support Check the websites: boostingbusinessni.com nibusinessinfo.co.uk Y N Further advice email : bisinfo@investni.com Local support e.g. Council websites Request support on your evaluation form