Factory Workshop Management: Five Ways to Reduce Costs
Reducing costs depends on mindset first
Many companies think that when it comes to costs, it is the responsibility of the finance department or cost accounting, while most employees believe, 'I am not the boss, and costs have nothing to do with me.'; Public property, no need to waste it; What benefits do I get from saving costs
In fact, cost reduction requires everyone's participation. Firstly, as the decision-making level of an enterprise, it is necessary to have the concept of investment, which is a fundamental condition that determines and influences the formation of enterprise costs; Next are the engineering and management personnel of the enterprise, who influence the level of product design and production costs; The third is the employees of the supply and sales departments of the enterprise, whose business activities affect the procurement cost of materials and the level of product sales expenses. So, cost is closely related to everyone.
Therefore, reducing costs first depends on mentality, and employees' mentality towards costs is related to corporate culture. Overall, it can be divided into four mindsets:
1. Work for the boss.
Enterprises with this mindset will never be able to reduce costs.
2. Work for oneself.
Like TCL's Kanban management, 5 boards are placed in the employee channel to indicate production, quality, consumption, cost, and team performance. At this time, employees pay attention to their own work effectiveness and unconsciously compare themselves with others. This can stimulate employees to develop towards the goals required by the company and also transfer dissatisfaction with superiors. By establishing a hypothetical enemy mechanism, employees will focus on their opponents for self motivation.
3. Work for the team.
That is to say, Haier has made individuals small and teams large. For example, Haier never rewards individuals but teams. Teams are also the the final say when recruiting people. This is why many of Haier's systems, including cost control, have been implemented.
4. Fighting for faith type.
This is also the highest level of enterprise, where employees will have a high degree of ideological unity.
Reducing costs starts with eliminating the root causes of waste
If waste is not eliminated, it is difficult to reduce costs. Like Toyota, which has always aimed to eliminate waste, it has spent nearly 70 years halving costs.
There are two main methods to eliminate waste:
The first method is to promote a culture of conservation and eliminate waste
Firstly, it is necessary to promote a culture of thrift within the company, making thrift a spirit of the enterprise and deepening the awareness of thrift in the hearts of every employee.
Secondly, we need to seize the decision-making leader and avoid overall waste.Decision saving is a saving that affects the overall situation. Establishing a conservation oriented enterprise should start with scientific decision-making, and obtaining maximum output with minimal input is the greatest saving for the enterprise.
Thirdly, we need to start with details, and savings should be reflected in every detail. Through refined management and the use of systems, profits can be squeezed out. People envy Fortune 500 companies, and upon closer analysis, they are the most prestigious companies, such as Toyota, which has no branches or offices worldwide and only a sales center in Nagoya. Wal Mart's Asian headquarters is located in a small alley in Beijing. The office area is only 260 square meters. There is no meeting room. Contracts are signed on the street at the entrance of the alley. In addition, when advertising, we never invite celebrities, but let employees do it as a reward for employees. When the president of Wal Mart Asia got off the plane, he carried a calculator in his bag. When he saw a suitable location, he took out the calculator, calculated the size of the room, and started to attract investment. He paid the rent of the landlord with the paid entrance fee. The management of the store was learned from the Kanban management of Toyota in Japan. The warehouse processing could be accurate to the amount of the store in three days. The refined management has always enabled Wal Mart to have unique cost advantages.
Fourth, savings in the procurement process. To control procurement costs, it is necessary to scientifically set and compress them. The main methods include strengthening inventory cost control; Break down the whole into small parts and purchase in large quantities; Establish a procurement cost analysis system; Adopting measures such as bidding, inquiry, comparison, bargaining, price based acquisition, and open market procurement; Establish a supplier selection system; Block loopholes such as kickbacks in procurement.
Fifth, control the core cost expenditures of the enterprise through cost savings in production. Reducing material and energy consumption and improving productivity are savings; Establish quota standards for raw material usage; Establish labor consumption quota standards; Control production costs; Implement a system of rewards and punishments for frugality.
Sixth, savings in marketing. Marketing expenses are a piece of "fat meat" that can be reduced. It is necessary to budget, analyze, and make decisions on marketing costs, control unnecessary marketing expenses, and ensure that every penny invested in advertising is effective. At the same time, it is necessary to reasonably control the various expenses of marketing personnel.
Seventh, thrift in management. Including meeting and time savings. The former can implement meeting savings in every meeting by saving meeting costs, meeting budget, controlling expenses, saving meeting time, and changing meeting methods; The latter can improve work efficiency by effectively managing time, doing what needs to be done, and doing things correctly.
The second method is to eliminate waste through on-site improvement
Improvement is always more important than management. A manager should not take pride in punishing employees, but should work with them to study methods to prevent them from making mistakes, while not providing opportunities and conditions for them to make mistakes. The 7 tools for on-site improvement are:
Firstly, create a visible waste scene by conducting thorough 6S (organization, rectification, cleaning, cleanliness, literacy, safety).
Secondly, IE and job standardization are the best tools for eliminating waste. Haier has successfully acquired over 30 companies using this management model.
Thirdly, identify waste through visual management. Visual management is a method of quickly solving problems by using visual perception such as graphics, charts, etc. to determine the current state and immediately make judgments.
Fourthly, using Kanban management to illustrate waste is to display the projects that one wishes to manage through various management dashboards, so that everyone knows the current management status of the management methods. This can give customers confidence and create a competitive atmosphere within the enterprise to reduce waste.
Fifth, manage the movement. Require managers to go to the work site to identify and address issues, and eliminate consumption at any time.
Sixth, answer 5 questions and find the key to the problem. Usually, asking why 5 times can uncover a solution to the problem.
Seventh, use error prevention and correction methods to reduce waste. In fact, the simpler things are, the more likely they are to make mistakes. Most people make mistakes by ignoring certain things, and punishment is useless. We need to work together to find ways to prevent mistakes and correct them. For example, inserting cards to power in hotels is a good way to prevent mistakes and correct them.
5 Ways to Reduce Costs
1. Factory contracting
This is a path that Chinese entrepreneurs must take, which can inspire employees' work enthusiasm and make them cherish their current jobs even more.
For the convenience of research, China Enterprise Federation has contracted two enterprises in Dongguan as pilot units for factory contracting. After contracting, the workshop director can earn 300000 yuan per year. Therefore, I specifically went to investigate, and the workshop director said, "You said it's less, it's 500000 yuan. In traditional enterprises, there are only two departments that make money: the sales department and the procurement department. However, after implementing factory contracting, each department makes money, while human resources and offices make money by providing services to each department. For example, if other departments need to recruit people, they can provide targeted services after clarifying salary and conditions. And the finance department has become a financial center, with each department having to set up its own account. Through analysis, it was found that the workshop director has become as smart as Toyota, realizing the true meaning of cost reduction driven by interests, picking up the money thrown on the ground and putting it in his own pocket. This reduces costs and naturally increases profits.
So, what are the ways and methods to achieve factory contracting?
There are mainly five aspects:
One is the supply chain system, which refers to the responsibility system of enterprise management. The next process is the customer of the previous process, which is the most core idea. The market mechanism is extended to the internal of the enterprise, and the "supply chain traceability chain" is formed by layer by layer connection.
Secondly, the factory will be fully contracted, and each department will become a comprehensive way to make money. Transform each employee into a 'business entity' and establish a three-dimensional contracting system. This is how Haier in China does it.
Thirdly, establish economic indicators for both units and individuals. Contractability and traceability can be achieved through production quotas, quality quotas, consumption quotas, cost quotas, equipment utilization quotas, and total expenditure quotas.
The fourth is the individual transaction settlement method between external and internal parties. Breaking the "piece rate wage system" and implementing a "cross traceability system for employees", piece rate wages will lead to a focus only on output and neglect of quality. Under the cross traceability system for employees, the principle of combining basic wages, performance-based wages, and floating wages, as well as the principles of traceability and transaction for returns, claims, and complaints, will be adhered to. In this way, an employee will understand the three technologies including the upper and lower processes, and there will be constraints between employees, no longer requiring inspectors.
Fifth, the contracting unit shall establish a "bank". Each unit sets up an accounting "bank" in the finance department, and there is a "transaction currency" within the enterprise, which is called "cost voucher" in Haier. This is like market operation, and people will be very shrewd. This requires product quality to pass the standard. Coupled with the "debt and credit" mechanism, each department implements the loan system at the beginning of the year, installment repayment, and the finance department truly becomes the "financial center" of the enterprise.
2. Compression of inventory levels
That is to say, suitable inventory means low cost. There are four main ways: one is to achieve zero inventory, which means there is no inventory and various materials are directly sent to the workshop, constantly running on the assembly line; The second is safety stock, also known as insurance stock or buffer stock, which is a protective stock set up to prevent stock shortages caused by random factors. For example, Wall code, the cycle is basically controlled at 3 days; The third is to implement centralized large warehouses, turn them into warehouse supermarkets, and unify management, such as merging raw material warehouses, semi-finished product warehouses, and finished product warehouses, which can save space and reduce labor costs; The fourth is on-time supply, which is the supplier criticality management method. Please invite the supplier to the company's warehouse and provide on-site supply for you.
3. Equipment maintenance and optimization
To achieve low costs through lean management. Equipment maintenance is a big hole that erodes the profits of enterprises, and frequent maintenance of equipment is caused by lack of maintenance. Some companies have dedicated repair parts warehouses with a large number of maintenance workers. In fact, the more maintenance workers there are, the more wasteful it is, which is caused by the incorrect concept of "I operate, you repair".
Enterprises should establish three-level maintenance, with the first level maintenance being the responsibility of operators, the second level maintenance being the responsibility of team leaders, and the third level maintenance being the responsibility of the equipment management department. The repairman becomes an equipment administrator or engineer, specializing in coaching employees to maintain equipment.
Additionally, attention should be paid to optimizing the equipment. Toyota says that devices with legs can run. Usually, equipment is fixed and all activities revolve around it, while live equipment can achieve zero handling.
4. Reduce labor costs
Optimizing resources means low cost. Domestic enterprises should shift from labor-intensive to optimizing talent resources. Due to increasing competition, personnel salaries still need to rise. To survive, it is necessary to focus on management, improve efficiency, reduce staffing, and achieve personnel saving; We need to respond to market changes with minimal personnel to achieve depersonalization.
5. Quality improvement
High quality means low cost, and quality improvement means getting employees right the first time. The quality cost includes prevention cost, identification cost, and failure cost. Prevention cost refers to the expenses incurred for employee training, accounting for 20% of the total cost; Appraisal cost refers to the costs related to inspection, such as inspectors and inspection equipment, which account for 30% of the total cost; The cost of failure refers to the significant cost of rework and re adding, accounting for 50% of the total cost. Therefore, if a company adds preventive costs, it will reduce the cost of identification and failure, ensuring that employees get it right the first time.