In industries that require high input costs to create physical products, the cost of goods sold is a major driver of profitability. Think food service businesses like restaurants, cafes and coffee shops and manufacturing businesses like packaged food, canned drinks and physical products.
This means that any wastage in the preparation of raw materials is directly drawn from your bottom line.
You can’t be everywhere at once to make sure materials are used efficiently and effectively. But you can implement systems to make sure employees are doing the right thing, even when you’re not there. Here’s how.
Why Reducing Wastage is Important
It’s not unreasonable to believe cost of sales can be improved by up to 5% by closing the gap between the theoretical (ideal) input cost and the actual input cost generated from physical inventory. For many business owners, these dollars make the difference between success and failure.
This is why reliable and efficient systems are important to cost control. But the proper training of employees is equally critical.
In the assembly line process that can be applied to any type of business that fits this mold, raw materials are purchased, broken down, processed and fabricated for retail sale. If you believe your specifications and measurements are correct, the next place to analyze is the procedures used in materials preparation.
Don't look over the shoulders of employees to see if a 1 foot measurement is really a 1 foot cut, and don't personally check to see that raw materials are trimmed to ensure maximum yield.
If you had that kind of time, you would do the job yourself.
No. Instead you should modify your employee's behavior. You want to ensure that employees break down raw products correctly because, whether you are there or not, they know their work will be checked.
How to Reduce Raw Material Wastage
Remove the garbage cans from your production line or preparation area.
In their place, substitute large plastic tubs and place them strategically throughout the production line or preparation area. Instruct employees to deposit all trimmings, cuttings and paper waste in the tubs.
Put a scale in a conspicuous place and have employees place their filled tubs in the rack. At the end of the shift, you or your supervisor personally checks the contents of the tubs to ensure proper preparation procedures are being followed and raw products are being used correctly.
This changes the psychological mind set of hourly preparation workers. They can no longer throw waste into a garbage can, never to be seen again. They become accountable for their work, because it can be monitored.
Showing a preparation worker the amount of usable waste in their tub has a dramatic impact. This direct feedback positively affects behavior, work attitude and morale. It is also an excellent tool for performance evaluation.
This technique can lower input costs by 1-2% almost immediately, and by up to 5% over time. It’s a very simple system to implement and run, and it might start to gamify shifts for your workers as they look to beat yesterday's measurement.
There's gold in those garbage cans.
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