MANAGING COSTS – IDENTIFY THE RIGHT PROCESS METRICS FROM THE BEGINNING

compiled by Dib Mossavi

The opportunity to manage, control and cut costs in a process improvement context is well-known but for those of you who are new to the practice, the savings may be as elusive as they are in high demand right now. 

There is no shortage of evidence in our economy that costs must be controlled. As much as I detest lay-offs, it is clear that many hundreds of thousands of workers are losing their jobs every month. Therefore, every ounce of process cost management may translate into pounds of saved jobs. Of course, there is only so much you can do to create efficiency. Some jobs will have to be trimmed until consumers can afford to consume again. The urgency with which you approach your process improvement project in a lean economy (to say the least) is critical for a number of reasons:

You’re likely to save jobs by creating process efficiency :-

  • You’ll innovate and disrupt the market to some degree, attracting much needed positive attention
  • You’ll become more competitive in the process
  • You’ll learn something valuable about the people you involve in the process which may make staffing decisions easier

Having made the decision to improve your processes and discover efficiency this year, make cost core to your analysis. While you may have focused squarely on throughput, volume, inventory reduction, pull rates, time in queue and other metrics just a few short months ago, I am suggesting you calculate the costs associated with everything you measure, and modify today.

Establish cost-cutting and control goals. Communicate them clearly in your project charter and hold everyone accountable for measuring impact and results. All of the more sophisticated BPM suites include cost factors in their application. If you’re running Visio in your shop, analyze your costs using simple Excel calculators. As long as your math isn’t flawed, it doesn’t matter how you collect and report your findings.

Present and report cost control findings and recommendations. Measuring quality improvements in a BPM initiative? Tell your story inclusive of costs.  

Costs can be identified in terms of:

  • Level (pay scale) of staff performing tasks
  • Number of staff and impact on capacity
  • Resource allocations (high, low)
  • Technology in use (high, low)
  • Automation of manual tasks
  • Time
  • Cost of raw materials (suppliers)
  • Cost of inventory
  • Cost of marketing and sales in bringing products and services to customers

Now more than ever, executives and board members will be looking to justify everything and every decision in terms of cost. Sad but true. BPM analysts and process owners must be sure to lead from a position of cost control before they’re made to.

Let me know what you think

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