Does your business need a waste audit?
Article by Karen Mortimore
It’s common for businesses at any stage of growth to suffer a decline in profit. In order to remedy the situation, it’s vital to first diagnose the problem.
Waste can occur in various areas of your business simultaneously. Like a leaky boat, you’ll continue to sink if you don’t find the leaks and repair them.
Ever heard of a waste audit?
It’s a systematic process where a business reviews all its operational activities, not only to identify the causes of a decline in profitability but to then implement strategies to turn things around.
Waste elimination is one of the most effective ways to increase profitability in a business. So, where should you start?
Eliminating waste: step by step
Thinking about where you’re wasting money, time and resources in your business can be overwhelming! That’s why it’s best to follow a structured audit process and perform it regularly.
- Conduct a waste audit to identify the areas of waste within your business.
- Prioritise action. Consider starting with the areas of highest value and the areas that are easiest to fix.
- Decide on a team to implement changes. Work out how many people will be on the team, who will lead them, and their needs in terms of time, skills and support.
- Establish key performance indicators (KPIs) to measure progress at regular intervals.
- Repeat a waste audit process at least every six months.
Examples of business waste
Where can you expect to find waste in your business? Here are some common areas.
Are you doing more than what’s required? Think about:
- excess paperwork or reports
- producing a product with no guarantee of a sale
- lengthy documents or emails
- how meetings are conducted.
From the start of a job until when you get paid, what are all the activities in between? How much time is spent waiting for:
- management decisions
- staff or subcontractors to become available
- client information
- payment from debtors
- repairs to equipment
- stock supplies?
Where is the waste in terms of transporting people, goods and information, both internally and externally? Look out for inefficiencies in:
- travelling to clients
- how many suppliers you’re using
- office layout, location of equipment and how much walking is required
- use of couriers
- performing multiple deliveries
- excessive material handling.
Are you using a sledgehammer to crack a nut? In your audit, consider whether you’re using the appropriate tools and processes, including:
- the use of outdated equipment
- staff with inappropriate experience and skill levels
- poorly documented systems and procedures
- double handling
- whether people are spending their time effectively. (Is the sales team wasting time on admin work? Is management wanting to make all the decisions?)
Usually related to waiting and overproduction, unnecessary inventory items can also qualify as waste. Improve the working capital available to your business by addressing:
- stock that’s becoming obsolete
- overdraft interest
- property you cannot sell
- supplies such as stationery, catering and consumables
- non-performing product ranges.
Defects and mistakes
You can lose money due to internal defects found before sale, and the cost of scrap, rework or delays. After sales, you can also lose profitability through warranty claims, on-site repairs and the loss of customers. Your audit should check for:
- poor instructions
- machine failure
- computer input/database errors
- poor design and specifications
- how time pressures are managed
- poor workmanship.
At SRJ Walker Wayland, we understand that undertaking a waste audit of your business can be daunting. Contact us for help identifying and fixing the leaks in your business.