The Hindu Business Line : ‘Focus on waste elimination’

Cutting flab rather than muscle should have been the priority of companies during the recent economic turmoil but what we saw around the world was that everybody rushed to cut costs where it was easiest, says Jayanth Murthy, Director, Kaizen Institute India Pvt Ltd.

“Though some experienced companies have cut costs in a sensible and systematic manner, many have rushed and done away with expenses that were the easiest to chop, such as advertising, human resources, travel and client interaction and it will take a long time to rebuild these departments,” he says.

By postponing maintenance of equipment, the companies are only prolonging their recession, he points out.

“A manager should define what value-adding is and the focus should be on waste elimination rather than cost elimination. Anything that a customer is willing to pay for is a value-adding activity. In times such as these, one should look at the situation from the consumer’s point of view. A customer will not be willing to pay for a company’s inefficiencies,” he says.

For eg, if a manufacturing plant produces a product at Rs 11.50 though it can be produced at Rs 10, then an inefficiency has been absorbed and the consumer will not pay for it. The consumer would be willing to pay only the market price for the product, says Murthy.

The time required to recover from such cuts would depend on how deep the cuts have been, he says. If eliminating a certain cost can send the right sense of urgency to the employees and industry, it is good though it might also generate a lot of hype.

He adds that it is during times of recession that the smaller companies upgrade themselves to take advantage of the lower prices of raw materials at such times.

But Murthy says that big-bang improvements are always better than incremental improvements (by percentages). While it would be useful to reduce the throughput time in a chemical factory from 17 days in a week to 16-and-a-half days, one may question the rational of such an approach.

“If a few seniors in the organisation put their heads together and devise strategies for operational breakthroughs, then the 17 days can be reduced to 10,” he says.

In his opinion, 90 per cent of the time set out for any given work process is wasted.

Another problem with organisations was that though they were generally able to implement improvements, they were unable to maintain them.

That is the cost of indiscipline that companies ended up paying for and which goes unrecorded.

It is also important for a manager to emphasise on operations rather than simply floating in the strategy space, he says.

“Most managers love to devise great plans but fail to show the same vigour and energy in the implementation process. A good manager should be able to move effortlessly from intent to execution. It is not enough to announce the strategy by cutting a ribbon and moving away, leaving the implementation to subordinates,” he says.

He compares a manager to the captain of a ship. Just as a captain not only directs the ship’s progress through the voyage but also mans the bridge looking out for icebergs, so also a manager has to prove himself by going through the sweat and grime of the implementation process.

Amongst the major industries of the country, the auto industry has done well on both efficiency and effectiveness, he says.

Kaizen India is a business unit of Kaizen Institute, Zurich, and is a global management consulting firm that has been helping companies implement tools and strategies for organisational fitness through the use of Kaizen LEAN strategies.

Some of Kaizen’s clients in India are Suzlon, Zydus Cadilla, Reliance, Enarco, ABB, BHEL and Abhishek Industries.