Penny Wise = Bad Business. You need to know why

Penny Wise = Bad Business. You need to know why

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Around a year ago, one of our customer was pushing us to improve our productivity by 2%. We did everything we could from time study analysis, to process consultant, to even having people take typing classes!! Our customer argument was simple “I have to bring down my cost by 10% and I can do that if you can improve your productivity by 2% and cutting a head count!”

 

I was talking about this at home over the phone with someone. My father (Mr. R. C. Hari Rao, who like Sudhir Achar, CEO of VA, is a quality man and Six Sigma black belt trainer) asked me what I was grappling with. When I explained to him the situation and he said in his own terse manner “Just convince them not to be Penny Wise.”

 

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Needless to say I was surprised and did not understand! I asked him to explain how this would help our customer in global cost reduction.

 

He explained by asking me three of questions:

 

Dad: Your customers goal is to reduce cost?

Me: Yes

Dad: VA is the operations expert for your customer and a low cost provider, right?

Me: Yes, but you know that.

Dad: How much money do you save your customers year on year?

Me: This customer has shared their cost with us. The cost savings is 36% with a quality that is better than their internal standards.

Dad: Now, think about it and give me the answer. You have all you need to come up with the answer.

Me: I get it! What you are asking me to do is to have them look at their overall cost and not just try and optimizing what we are doing. Rather than try and squeeze 1% of an already efficient system it would be better to have them look at giving us more work! What you are asking me to have them do is not be ‘Penny wise…'”!

Dad: You got it!

 

The next day, I marched forward and convinced our customer to think out of the box and increase our workload than decrease it! I went on and extended the concept to all their suppliers!

 

Our customers are sensible people. They looked into our proposal for their entire organization. They implemented the plan and were able to achieve their over cost goals (and more) by simply having their suppliers and partners to take a great goal in delivering goal.

 

I went back, thanked my dad for a short lesson in ‘Lean thinking‘ and wished him a ‘Happy Father’s Day’!

 

If you want to learn more about ‘executing strategies to success’, ‘Lean Thinking’ and bringing ‘operational excellence’ into your organization you need to have a tool like Club VA and call any one of your friends at VA. We will be glad to help!

About Vantage Agora:

Vantage Agora (VA) is a global provider of social enterprise networks software products for operational excellence and back-office solutions for operations excellence along with consulting services for companies in the insurance, finance, and healthcare sectors. As a SSAE 16 Type II audited company, Vantage Agora utilizes advanced data processing and quality control systems on a secured network to ensure efficient, comprehensive management of back-office functions such as insurance, financial, and administrative tasks. Founded in 2004, Vantage Agora has offices in Cleveland and Dallas.

 

Harsha

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