Scope for reducing costs further?

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The simple answer is most likely, it might seem a daunting challenge for an organisation that has already gone through painful changes but continual innovation in business processes, systems and resourcing methods makes it possible.

Most organisations have not yet reached the level of managing expenditure by business process and fewer still have got to managing by service levels within processes.  Budgets continue to be set by function and the relationship with processes can be very loose.  In such environments budgets can be skewed towards functions with powerful leaders rather than focused on process optimisation, there will be a real need to reprioritise budget to where it is needed most.

Take a look at OPTIMISER cost optimisation in a box.  It is a methodology and system that will provide you with the critical information and reallocate budgets to where they are needed most.  For more information click here

Priority budgeting or lean thinking?

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Organisations are normally constrained by finance or resource availability, hence leaning initiatives need to be focused on high priority targets, i.e. ones that will give the biggest return on investment.   The real problem is that many organisations do not have the right information to allow them to select the best targets.

To be effective, management need to broadly know the true value, cost and performance of all processes and their inter-relationships with support functions.   Without such knowledge there is a risk that leaning initiatives will not be scoped or  prioritised optimally. In short, higher value targets may be missed, resources wasted and measurements of potential benefits unreliable!

The best way to optimise resources is by leading with a programme of Priority Based Budgeting.  Carried out properly  this will yield massive returns on investment and prioritise all longer term improvement projects.  Priority Base Budgeting is complementary to Lean Thinking and process engineering, it stimulates process leaning, accurately targeting leaning effort to processes that will yield the biggest return on investment.

Should you consider that “Lean Thinking” in your organisation is “Not Lean Enough” then take a look at OPTIMISER cost optimisation in a box.  It is a methodology and system that will let you know exactly where to target your efforts continually.  For more information click here.

 

Does “best practice” reduce costs?

The answer should be yes, best practice (company procedures) should be designed to ensure that every activity is carried out as efficiently as possible within the agreed levels of service and safety.  For certain activities best practice may be defined by legislation, industry practices and even directives from equipment suppliers.

However, over the last decade organisations were sold the idea that best practice could be the same for all.  The drive for industry best practice combined with benchmarking (particularly in overhead activities) became a justification for additional expenditure on systems, functions, jobs and salaries as managers tried to match other organisations.

Some of this was unnecessary and added substantial costs in overhead areas which should now be critically reviewed and optimised.  The key questions to be answered are:  what is the total cost of the process and each of its activities?;  what are the service level options of each process activity from minimum to maximum?; and how do we optimise and prioritise all these service levels across the organisation to meet financial constraints?.

The result of this approach will be a reduction in overhead costs and best practice set in the context of efficiency and financial constraints.  Take a look at OPTIMISER cost optimisation in a box.  It is a methodology and system that will let you know exactly where to target your efforts continually.  For more information click here.

Why are projects so risky?

Flying an airplane in level flight is not too difficult, but making major maneuvers is challenging.  Running an organisation is similar, most managers are comfortable keeping established processes running but when change is needed  (i.e. new projects) a different set of skills and experiences are required and some of the passengers get concerned.  In short, projects are risky because:

>  Organisations are resourced for running daily operations and not for implementing complex change .
>  Projects frequently involve multi-discipline complexity, for example technology and systems integration.
>  Many people do not like change and some will actively resist.
>  Projects becoming driven by “user wish lists” rather than strategic priorities and operational necessities.
>  Lack of executive support and project managers and staff with insufficient skills.
>  Project managers being ”reporters of deviations” rather than solvers of problems.
>  Organisation becomes over dependent on suppliers and think that fixed price contracts will eliminate all risks.

To find out more and how these problems might be overcome read on..