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Similar to Reduce Waste and Improve Your Bottom Line with ISO Management Systems
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Reduce Waste and Improve Your Bottom Line with ISO Management Systems
- 1. Wasting Away? A Guide to using ISO management systems to reduce waste & improve your bottom line
- 2. Where are we going in 2012?
- 3. Cost of not “getting it right first time” • Prevention costs £ • Appraisal & rework costs £ x 10 • Failure costs £ x 100
- 4. The principle behind ISO Management Systems
- 5. Business benefits of ISO management systems • Achieve significant cost savings • Minimise your business risks • Increase your customer base & sales • Improve staff morale & involvement • Better relations with third parties
- 6. ISO9001 • PDS (18 employees) – Certification gave access to new markets across the UK & Europe – 30% increase in sales – Substantially reduce manufacturing waste & stock losses – Improved production output – Improved delivery lead time and reliability
- 7. ISO 14001 • Cost saving • Business risk
- 8. OHSAS 18001 • Cost savings • Business risks • Customer base & sales • Staff performance & morale
- 9. “We free you get on with your business” Our capabilities range from practical application of quality, environmental & safety management, to fully certified “ISO” systems. Contact Richard Shearwood-Porter 01934 610168 / 07909 528942 info@theHSQEdepartment.com www.theHSQEdepartment.com 9
Editor's Notes
- I’m here today to challenge you with the idea that there are still significant wastes in your businesses but that, by taking a systematic approach, you can reduce if not eliminate these wastes and make major improvements to your bottom line.We’re going to look at the potential business benefits of formal systems for quality, environmental & safety management and some case studies of companies that have used them successfully.
- BoE prediction of growth for the UK economy next year is 0.5% and inflation of 2.0%. This leaves the majority of British Companies with a picture of flat turnover but rising costs that will put a net squeeze on the finances of 1.5%.When the economy is buoyant, most business leaders focus on sales growth, because that’s interesting, but what do you do when the prospects for sales are flat? I suspect that most of the companies here have been working at cost reduction and that makes a huge amount of sense because when margin is running at 10% a £1,000 saving in operating costs has the same effect on the bottom line as a £10,000 increase in sales.But what if I told you there might be a 20% saving in operating costs up for grabs?
- Studies have shown that between 15% & 40% of the average company’s turnover is taken up by unproductive time, unnecessary processes and wasted materials. As companies that have weathered the recession you’ll already have been putting effort into this but, a rule of thumb, the average organisation can save 20% of turnover by doing things right-first-time.The ‘60’s saw the introduction of Total Quality Control , which has gone on to spawn Lean Manufacturing and Lean Administration techniques. Total Quality introduced the idea of:Prevention costs: training, planning, plant maintenance, reviewing legal & customer requirements, etc. Appraisal & rework costs: control checks on people’s work, re-working errors, reconciling stock checks, disciplinary procedures, checking deliveries, cleaning up etc. Failure costs: waste to landfill, rejects, warranty claims, customer complaints, etc. The 1-10-100 Rule provides a rough guide for comparing the relative costs of the three categories. A company may spend X £sx on preventing a quality problem, They'll probably spend 10 times as much to find and rework the mistake in-house after it occurs. If the failure reaches the customer, the cost of rectifying the failure will probably be 100 times the cost that would have been incurred to prevent it from happening in the first place. None of these add value to the business and your customer doesn’t want to pay for them. It doesn’t matter whether you’re involved in sales, office administration, making things or running a distribution centre, it’s always cheaper to do a job Right First Time
- So how can management systems help?The Quality Management Standard ISO 9001 is the granddaddy of them all & started with military purchasing in the ‘50s. It won’t save you money on its own, you and your employees do that, but it’s a tried and trusted framework to manage your business improvement processes.Follows Plan – Do – Check – Act cycle, where you plan your project, deliver it, see how it worked out and feed the lessons forward into the next project.The other two standards that I’m going to touch on, ISO 14001 for environmental management & OHSAS 18001 for safety management, follow same model. 9001 is not so much about quality but about sound control of your business.It’s about meeting the needs of customers in a profitable way. This is important, because its no good making your customers happy at the expense of going bust. 9001 concentrates on the customer, 14001 on prevention of pollution and 18001 on prevention of accidents & ill-health, BUT ALL focus on sound planning, leadership & employee competence, so everything is delivered right-first-time to minimise waste and business costs.
- If management systems are designed and implemented well, the returns can far exceed the investment.In general terms, you should expect:-Cost savings due to:Lower raw materials wastage (typical raw materials losses are 15% of the purchased value)Lower waste disposal costs due to reduced waste to landfill and cost recovery from recycling (Landfill tax £56/tonne, increasing by £8/tonne year on year, plus gate fees, plus transport, can add up to over £80/tonne) (PET bottles - £450/tonne, mixed paper & board ~£105/tonne, mixed cans ~£160/tonne).Lower energy & utility costs (the EA has estimated that most SMEs can save up to £1,000 per employee per year by simple energy efficiency measures, e.g. turning a desktop and screen off when not in use can save up to £100/computer/year)Lower customer claims or penaltiesLower insurance because of less riskBusiness risk:Reducing the chance that suppliers or subcontractors will let you down – fewer supply chain failuresFewer accidents, break downs, emergencies, loss of key personnel reduce business interruptionsLess chance of a serious customer rejectionLess chance or prosecution of company and its officersIncreased customer base & sales by:Improving your reputation for customer satisfactionMeeting supply chain purchasing requirements for having standards in placeAnd because you’ve reduced waste you can maintain margin under price pressureStaff: Get more satisfaction from the job because they are more involved in the business and have opportunities to gain new skillsReduced sickness/absenceFewer accidentsThird parties:Less grief from regulators & plannersLess aggravation with neighboursReduced chance that pressure groups & campaigners will hold up projectsUnsurprisingly, a recent survey of the construction industry by a national accreditation body showed that 80% of all companies thought that developing and retaining customers was a top priority. However those that were certified to ISO 9001 or 14001, put a much higher priority on cost reduction, finding new markets, managing risk and motivating staff.Let’s have a look at some case studies
- One example is PDS, a small company in the north Midlands that makes and supplies road drainage products.PDS already had an 9001 system, but it wasn’t delivering any business benefits, so they overhauled it between 2007 and 2009.They were then able to show compliance with a range of minor standards, which allowed them access to new markets with the Highways Agency, Italy, Germany, Spain & the Czech Republic.This led directly to a 30% increase in sales plus these other benefits
- Lets have a look first at potential Cost savings. ISO 14001 helps you to identify all of the environmental impacts of your business and to put control measures in place to reduce them. That can translate directly into reduced waste.Small paper mill I worked with saved £75,000 per year after it identified all of its physical waste streams and put strategies in place to reduce waste to landfill. Business riskISO 14001 also makes sure that you comply with all of the environmental legislation that applies to your business.For example companies that turn over more than £2m and handle more than 50 tonnes/year of packaging materials must register as a producer of packaging waste and take responsibility for recycling. Smaller companies that fail to register face fines running at ~£6,000 per year. Even larger companies can get it wrong - Red Bull failed to register and were fined £270,000. Now if that’s not a waste I don’t know what is!There’s a wide variety of other legislation covering the environment but, most recently, theCompanies Act came into force in 2008 and makes it law for Directors to have regard for their company’s impact on the community & the environment.Also, The Environmental Damage Regulations came into force in March 2010, which require all organisations to put measures in place to prevent environmental damage. If preventive measures fail, organisations must take responsibility for and report the damage that they have caused and must rectify it at their own cost. If organisations fail to rectify any damage, they will be charged by the regulators for the clean up.Directors and managers with environmental responsibility are open to prosecution for negligence or wilful non-complianceYour insurance policies don’t cover you if you break the law.
- OHSAS 18001 helps you to identify all of the health & safety risks associated with your activities and to put measures in place to control the significant ones.I’ve taken the following from case studies of three companies related to the construction industry. A small scaffolding company with only 8 employees, a quarry with 40 employees and a brick company with 50 employees. These are some of the benefits they’ve seen by starting to put safety management at the core of their businesses.Cost savingsScaffolding co reduced its insurance costs by£2,500/year.Quarry co : reduced insurance by 30% & increased production by 5%.Brick Co : reduced absence rates and, by doing so, increased production by 1.5% (£20,000).Business risksCompanies also have a duty to protect the public.What some people don’t realise is that it isn’t just the company that is fined for a healthy and safety breaches but that the HSE will go after company officers too. In one recent case a member of the public fell into a hole after a night out & died of exposure. The company was fined £30k, with £3k costs, but a director was also fined £15 k & disqualified. Being local companies, I suppose you’re all aware of Cotswold Archaeology? Cotswold Archaeology was the first case of Corporate Manslaughter to reach the courts. It was a small company with a turnover of about £150 and just about breaking even. An employee died when an un-shored excavation trench collapsed on him. The courts decided that the company consistently failed to follow its own safety procedures and had a systemic culture of risk taking. The company has been fined 250% of it’s turnover and is now in liquidation.Customer base & salesScaffolding co: able to switch from low value domestic projects to higher value large scale commercial projectsStaffScaffolding co: No reportable accidents in 4 years.Quarry: No reportable accidents for 18 months, compared with 4 in the previous 18 months. Risk of accidents to an employee reduced from one every 3 years to one every 6 years. Reduced sick leave led directly the increased output mentioned earlier.Brick Co: reduced lost days by 64%, giving the production increase mentioned. Staff turnover, for which you can read recruitment & training costs, also reduced significantly .
- So – I hope that I’ve been able to convince you that there are areas of waste in your business that you can tackle to reduce your bottom line.We’ve looked at the 3 most common management standards and how they can be used to tackle waste reduction.When you’ve done all that you can to reduce waste in-house, you can still call on out-side advice to help you work towards zero waste to landfill.