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Waste Reduction: How to Increase Profits by Developing More Efficient Processes

Robert S. Olszewski, CPA, AMSF Director, Outsourced Accounting & Finance Services

This article originally appeared in the January 2014 issue of Smart Business Philadelphia magazine.

By definition, the term "waste" is an act or instance of performing or spending carelessly, extravagantly or to no purpose. Despite the negative connotations surrounding waste, many businesses are seeing waste as an opportunity.

Successful businesses are actively engaged in the identification and reduction of waste in processes, says Robert S. Olszewski, a director at Kreischer Miller.

"Processes either add value or create waste to the production of a product or service," says Olszewski. "Waste can account for up to 30 percent of the operating costs of an organization. Unfortunately, waste has become accepted by many as what normally happens. Most businesses put significant energy into increasing sales. However, pushing more business through an inefficient system makes no sense."

Smart Business spoke with Olszewski about the process and enhancing the probability of reducing waste.

Are there common areas of waste in a business?

Waste reduction is one of the most effective ways to increase profitability in businesses. Prior to jumping into the issue identification process, it is important to comprehend what waste is and where it can be found. Toyota, after years of work to remove waste, identified the most prominent ones. The seven most common wastes identified by Toyota include overproduction, waiting, transporting, inappropriate processing, unnecessary inventory, motion and defects.

As we facilitate activities surrounding the waste reduction process, we often find that the key areas of waste are clear to all levels within the organizational structure. The elephant in the room needs to be addressed.

Is there a process businesses can use to reduce waste?

Conducting a waste assessment is the starting point, which generates a wide range of issues. With so many issues requiring attention, the project can be overwhelming. Therefore, ranking priorities enables the most important issues to be dealt with first; focus on the issues that have the greatest combination of economic benefit and ease of correction.

Start with the end in mind by establishing mutually agreed upon key performance indicators to monitor the effectiveness of the change being implemented or the impact of issues being addressed.

Who should be involved in waste reduction?

Waste reduction is not a task for a single individual; formation of teams is essential. Teams are not spontaneously generated, they require lots of hard work. It is unrealistic to believe your team will network and instantly reach peak performance.

Teams go through four distinct stages: honeymoon period, power struggle, working through frustrations and settling into a high performance mode. Don’t worry when the team enters into a power struggle, as conflict is normal; don’t take it personally. Change should be welcomed and the probability of success may be enhanced with an independent third party facilitator.

What are the most common issues you have observed in the process?

First is overcomplicating the process. We recommend isolating the significant few from the trivial many. You must be laser-focused on the issue and define where you are now, where you want to be, and form strategies on how you are going to get there. Do not get overly excited about where you are now and begin attempting to correct it. Be certain to define where you want to be in order to define and enjoy the success.

Second is accountability for results. Construct a one-page plan that highlights key action items, responsible parties and timelines. In addition, we recommend performing routine assessments for accomplishing mutually agreed upon goals and expectations.●


Contact the Author

Robert S. Olszewski, CPA, AMSF

Robert S. Olszewski, CPA, AMSF

Director, Outsourced Accounting & Finance Services

Outsourced Accounting & Finance Services Specialist

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