By Tojin T. Eapen
Cost innovation refers to the process of finding ways to reduce costs while maintaining or improving the quality of a product or service. It involves identifying and addressing inefficiencies in the production or delivery process and finding innovative ways to reduce costs while maintaining or improving performance.
Cost innovation can be achieved through a variety of methods, including streamlining operations, automating processes, finding new suppliers or vendors, and implementing lean manufacturing principles. Cost innovation is often pursued in order to increase competitiveness in the market, as companies that are able to produce high-quality products or services at a lower cost are more likely to attract customers. It can also be a way for companies to increase their profitability by reducing costs and improving their bottom line.
We identify 12 process improvement heuristics that can be used to rethink and redesign business processes to drive cost innovation in organizations.
Cost Innovation using Process Heuristics
Process heuristics are approximate principles or guidelines that can be used to analyze and optimize a process. These heuristics can help identify bottlenecks, reduce waste, and improve efficiency. Here are some examples of how each heuristic can be applied:
Eliminate a component/activity: If a component or activity is not adding value to the process, it can be eliminated to streamline the process. For example, if a manufacturing process includes a step that checks for defects, but the defects are rare and can be easily fixed, the defect checking step can be eliminated to save time and resources.
Move an activity earlier or later in time: By moving an activity earlier in the process, it can be completed while other activities are being performed. This can help reduce the overall time it takes to complete the process. For example, if a construction project involves building a foundation and then framing the walls, moving the foundation work earlier in the process can allow the framing to begin while the foundation is being poured, saving time. Sometimes moving an activity to a later stage in the process can also improve efficiency. For example, if a software development team is working on multiple features at once, they may find it more efficient to complete all of the coding for one feature before moving on to the next, rather than constantly switching between features.
Parallelize (Serialize) a serial (parallel) activity: If an activity is currently being performed in a serial (sequential) manner, it may be more efficient to perform it in parallel. On the other hand, if an activity is currently being performed in parallel, it may be more efficient to perform it in a serial manner. For example, if a team is assembling a product and each person is working on a different component, it may be more efficient to have one person complete all of the components for one product before moving on to the next, rather than working on multiple products at once.
Segment an activity into shorter steps: Breaking an activity into smaller, more manageable steps can help improve efficiency and reduce the risk of errors. For example, if a team is working on a large research project, they may find it more efficient to break the project into smaller chunks and assign each chunk to a different team member.
Balance an imbalanced activity: If an activity is taking significantly longer to complete than other activities in the process, it may be causing a bottleneck. By balancing the activity with other tasks, the process can be more efficient. For example, if one team member is responsible for completing all of the quality checks for a manufacturing process, it may be more efficient to divide the quality checks among multiple team members.
Add/Remove slack: Sometimes adding slack (extra time or resources) to a process can improve efficiency by allowing for unexpected delays or issues. On the other hand, removing slack can also improve efficiency by eliminating unnecessary time or resources. For example, if a team is working on a project with a tight deadline, they may need to add slack by assigning additional team members to the project to ensure it is completed on time.
Combine activities into a single step: If multiple activities are related and can be performed together, combining them into a single step can improve efficiency. For example, if a team is working on a marketing campaign and currently has separate steps for creating the content and designing the graphics, they may find it more efficient to combine the two steps and have one team member handle both tasks.
Adapt activity based on situational conditions: In some cases, it may be necessary to adapt the way an activity is performed based on situational conditions. For example, in a supply chain process, the method of transportation may need to be adjusted based on the distance and time constraints of the delivery. Using a more efficient mode of transportation, such as air cargo for shorter distances or ocean shipping for longer distances, can lead to improved efficiency and cost savings.
Find a new use for existing component/activity: In some cases, it may be possible to find a new use for an existing component or activity, which can lead to improved efficiency and cost savings. For example, a company may have a machine that is no longer being used for its original purpose. Rather than disposing of the machine, the company may be able to find a new use for it, such as repurposing it for a different manufacturing process.
Reverse the direction of an activity: In some cases, it may be beneficial to reverse the direction of an activity in order to improve the efficiency of the process. For example, in a warehouse picking process, the direction in which items are picked may impact the overall efficiency of the process. By reversing the direction in which items are picked, it may be possible to reduce the distance traveled and improve efficiency.
Extremize (Excess action): Extremizing, or taking an activity to the extreme, may be useful in certain situations. For example, in a manufacturing process, it may be possible to increase the speed or output of a machine to the maximum capacity in order to meet high demand. However, it is important to carefully consider the trade-offs and potential impacts of extremizing an activity, as it may lead to increased costs or risks.
Replicate a component/activity: In some cases, it may be beneficial to replicate a component or activity in order to improve the efficiency of the process. For example, a company may have a bottlenecks in its manufacturing process due to a single machine that is unable to keep up with demand. By replicating the machine, it may be possible to increase the overall output and efficiency of the process. However, it is important to carefully consider the costs and benefits of replicating a component or activity before making a decision.
The above heuristics can be useful for improving the efficiency and effectiveness of a process or system. By applying these techniques and strategies, it is possible to identify and address bottlenecks, reduce waste, and streamline operations, leading to improved performance and cost savings. However, some of these strategies involve tradeoffs with each other and may lead to a loss in the reliability and resilience of the overall system.