Intelligent Cost Reduction

The Need

The current business environment is trapped in a vortex. The singular strategy for survival is Intelligent Cost Reduction (ICR). Organizations need health in their bottom line for survival.

Our traditional vertical silo thinking for business management requires a paradigm shift. We need to remember that work flows horizontally through cross functional processes to the customer. The performance of these processes can impact the bottom line, significantly. Consequently, we need to focus on process efficiency, by eliminating the chronic waste locked (inadvertently budgeted for) in manufacturing, services, and business processes. Dr J M Juran refers to this chronic waste as the Cost of Poor Quality (COPQ) of an organization.

Tip of the Iceberg

When it comes to COPQ, most organizations have a tendency to focus on the initial or visible 5-10% of total cost (waste, rework, inspection costs, etc). What is not evident, but crucial is that the rest 15-25% of the hidden cost is not visible. Metaphorically, this is comparable to the Iceberg.

Problem Solving Matrix

Meeting the Need

The COPQ iceberg is approximately one-third of total costs in any organization. The data for this estimation is not readily available in existing accounting systems.

Qimpro has a structured Intelligent Cost Reduction methodology for assessing the COPQ iceberg:

  1. ICR Tool® to estimate the COPQ in departments
  2. Process Mapping to estimate the COPQ in processes

    These two exercises require partnering with the Cost Accountants of the client organization.

  3. Problem Solving Rx to train project teams to work on the identified problems/OFIs using a structured problem solving methodology, quality improvement tools, and creativity tools; as well as the appropriate application of these tools.

Qimpro Proposition

Problem Solving Matrix

Results

Tangible Results:
- Improved quality
- Reduced costs

Intangible Results:
- Improved ideation skills
- Improved cross-functional communication
- Internal and external team recognition
- Thirst for knowledge mining

Continuing Results:
- Capability and capacity to continue Intelligent Cost Reduction