LO3. Implement Cost Effective Operations

Information Sheet 3.1: Optimization of Workplace Resources

Resource optimization is the set of processes and methods to match the available resources (human, machinery, financial) with the needs of the organization in order to achieve established goals.

When a company is managed using a systemic approach, resource optimization is strictly linked to the concept of constraint and a systemic vision of the company. Indeed, without a systemic vision of the company we are unable to identify the global effectiveness of resource allocation and we run the risk of using resources available mainly to respond to emergencies that daily occur in the various parts of the organization.

Intelligent Management sees the structure of an organization as a network of projects which cut across company “functions”, in contrast with the hierarchical view of a company divided up into silos unable to recognize precise patterns and rules of interdependencies.

When we manage a company as a network of projects we must be able to allocate the resources available in the most efficient way possible, always bearing in mind that we have to achieve the global goal.

A project is itself a system: a network of elements (tasks) that are interconnected and interdependent, that work together to achieve a precise goal. The fact that the tasks are carried out by a pool of finite resources means that optimizing the sequence of tasks is a matter of considerable complexity. (cf. the well-known problem of P vs. NP).

A further level of complexity is due to the human factor connected with determining the length of individual tasks. It is  well known  that  if  we are asked by our boss how long it takes  us  to  complete  a  certain  task,  we tend to protect ourselves by asking for considerably more time than is strictly necessary. This is made worse by multitasking (the tendency to do several things in parallel).  While multitasking is very useful for computers it is decidedly counterproductive for the human mind. Finally, there is the effect of the so-called student syndrome, in other words whenever we have more time than we need to do something we will always put it off until the last minute.

An efficient use of resources to carry out a project requires us to:

• Have a shared vision of the global goal to be achieved (remove unnecessary protection from individual tasks)
• Eliminate multitasking (increased effectiveness in the tasks)
• Identify the constraint (the critical chain) and protect it  with  a buffer of time (thus protecting the project from variation)
• Carefully manage the operational phases  of  the  project (capitalize on time gained)
• Carry out a  statistical  analysis  of  the  project  buffer  consumption using Statistical Process Control (SPC) (more effective project management)

The situation becomes more complex when multiple   projects   have to be managed, and possibly by different people.

3 Ways to Optimize Your Resources for Growth

For companies interested in growing their business, or simply increasing profitability, the following are three ways to get more for the money it takes to run your business.

1. Leverage the Power of Your People.
   • Facilitate Collaboration and Socializing.
   • Communicate Openly and Often.
   • Arm Them With What They Need to Do a Great Job.
2. Make Your Brand Matter.
   • Take Time to Clearly Define Your Brand.
   • Align Your Brand Ambition With How You Do Business.
3. Don’t Try to Do Everything Yourself.

Information Sheet 3.2: 5S Procedures and Concepts

5S is a systematic form of visual management utilizing everything from floor tape to operations manuals. It is not just about cleanliness or organization; it is also about maximizing efficiency and profit. 5S is a framework that emphasizes the use of a specific mindset and tools to create efficiency and value. It involves observing, analyzing, collaborating, and searching for waste and also involves the practice of removing waste.

What Does 5S Stand For?

5S, sometimes referred to as 5s or Five S, refers to five Japanese terms used to describe the steps of the 5S system of visual management. Each term starts with an S. In Japanese, the five S’s are Seiri, Seiton, Seiso, Seiketsu, and Shitsuke. In English, the five S’s are translated as Sort, Set in Order, Shine, Standardize, and Sustain.

There are five key practices involved in 5S. They are as follows:

Japanese Term	American Term	Definition
Seiri	Sort	Sort through materials, keeping only the essential items needed to complete tasks. (This action involves going through all the contents of a workspace to determine which are needed and which can be removed.   Everything that is not used to complete a work process should leave the work area.)
Seiton	Set in Order	Ensure that all items are organized and each item has a designated place. Organize all the items left in the workplace in a logical way so they make tasks easier for workers to complete. This often involves placing items in ergonomic locations where people will not need to bend or make extra movements to reach them.
Seiso	Shine	Proactive efforts to keep workplace areas clean and orderly to ensure purpose- driven work. This means cleaning and maintaining the newly organized workspace. It can involve routine tasks such as mopping, dusting, etc. or performing maintenance on machinery, tools, and other equipment.
Seiketsu	Standardize	Create a set of standards for both organization and processes. In essence, this is where you take the first three S’s and make rules for how and when these tasks will be performed.  These standards can involve  schedules, charts, lists, etc.
Shitsuke	Sustain	Sustain new practices and conduct audits to maintain discipline. This means the previous four S’s must be continued over time. This is achieved by developing a sense of self-discipline in employees who will participate in 5S.

Information Sheet 3.3: Criteria for Cost-Effectiveness

The term cost-effectiveness has become synonymous with health economic evaluation and has been used (and  misused)  to  depict  the  extent to which interventions measure up to what can be considered to represent value for money.

Cost-effectiveness analysis is one of a number of techniques of economic evaluation, where the choice of technique depends on the nature of the benefits specified.

In cost-utility analysis the benefits are expressed as quality-adjusted life-years (OALYs) and in cost—benefit analysis in monetary terms.  As with all economic evaluation techniques, the aim of cost-effectiveness analysis is to maximize the level of benefits — health effects — relative to the level of resources available.

Costs are seen differently from different points of view.  In economics the notion of cost is based on the value that would be gained from using resources elsewhere — referred to as the opportunity cost.

In cost-effectiveness analysis it is conventional to distinguish between the direct costs and indirect or productivity costs associated with the intervention, as well as what are termed intangibles, which, although they may be difficult to quantify, are often consequences of the intervention and should be included in the cost profile.

• Direct costs: Medical: drugs; staff time; equipment. Patient: transport; out-of-pocket expenses.
• Productivity costs: production losses; other uses of time.
• Intangibles: pain; suffering; adverse effects.

It is essential to specify which costs are included in a cost- effectiveness analysis and which are not, to ensure that the findings are not subject to misinterpretation.

How to use cost-effectiveness analysis

A distinction must be made between those interventions that are completely independent — that is, where the costs and effects of one intervention are not affected by the introduction or otherwise of other interventions — and those that are mutually exclusive — that is, where implementing one intervention means that another cannot be implemented, or where the implementation of one intervention results in changes to the costs and effects of another.

Information Sheet 3.4: Workplace Productivity

“Your business is only as good as your employees.” You may have the best materials, the latest technology, the coolest working spaces, the newest innovations, the most creative product – but all these things are really quite meaningless without the core of your business: your employees.

What is workplace productivity?

Workplace productivity is the efficiency in which tasks and goals are completed for the company. By creating a productive workplace, benefits such as profitability and employee morale will be more discernable.

Increasing Efficiency

Given that workplace productivity is basically completing goals  in a  timely  manner,  it is  important  to  understand  how  to  accomplish   that without sacrificing the quality of the work.  This means that in addition to being quick, employees must also be correct.  It is the efficiency that cannot be ignored if maximum productivity is the aim.

Efficiency is also hugely affected by goal setting.  While a to-do list can be daily goals of sorts, other goals, such as sales reached this week, or total words written today can make noticeable positive changes. Whatever it is that your company would like to accomplish for long term reasons should be written down and truly attempted to achieve.

Productivity also gets a boost when your office space is clean and properly organized. Ensuring that items are where they should not only save time from looking for it, but it can help in the thought process.  When we have to stop during our most productive times in order to locate a document, we can easily post our train of thought.  Getting back into the right mindset after searching for that document can be a struggle, thus a productivity killer.

Advantages of Productivity in the Workplace

Profit and Productivity Rates

Possibly one of the most important and most convincing of benefits to productivity and efficiency. When more work is getting completed in fewer hours, less is being spent on the work itself.  This means that a company can expect a higher profit.

On the other side of the business, a company will likely see that the customers are much happier with the turnaround times and overall efficiency.  While some internal aspects of a business are unclear to the outside customer, there are some parts that become clear when a customer uses a company.

It also makes an impact on the image of a company. From customers to   shareholders   and   employees, high productivity often gives off the image of having it all together.  However, a lower level   of   productivity can make it seem as though the company is not on top of things.

It has been made clear the most effective ways to increase workplace productivity and why it is in a company’s best interest to do so.  By defining workplace productivity as the level of efficiency in which tasks and goals are completed for a company, it is understood that it involves both quality of work and the time it takes to complete it. By maximizing workplace productivity, a business has the ability to flourish.

Information Sheet 3.5: Impact of Entrepreneurial Mindset to Workplace Productivity

An entrepreneurial mindset is a set of skills that enable people to identify and make the most of opportunities, overcome and learn from setbacks, and succeed in a variety of settings.

If you consider yourself an entrepreneur, it’s important to know why entrepreneurial mindset is important for business.

1. Thinking like an entrepreneur will help you right from the beginning

You have a plan for your business, you’ve figured out all the details, and you’re ready to start making money, but it’s normal to feel worried or anxious about your new venture. Here’s where you should begin to channel your inner entrepreneur! Creating that entrepreneurial mindset will help you to think about what you’re doing and why. It will help you to know where you would like your business to lead you, and what risks you’re willing to take to succeed. If you know the answers to these questions, you’ll be ready to tackle all the challenges your new business throws at you.

2. An entrepreneurial mindset will help you in other areas of your life

Being willing to take risks and accept failure is a unique skill that isn’t relevant solely in the business world. Incorporating an entrepreneurial mindset into your everyday life will help you to minimize the importance of failure and rejection in your life.  It will also help you to keep moving forward even when things are difficult. Additionally, being able to plan ahead  and  foresee potential problems  (a  key  part  of  an  entrepreneurial  mindset) will help you to live a more organized, less stressful life. In turn, this will help you to better run your business.

3. Having an entrepreneurial mindset will encourage creativity

If you’re open to innovation and willing to take risks, you’ll be more likely to think outside the box. If something isn’t working well, there may be more than one fix, and you shouldn’t always fall back on the simplest or safest method. Critical thinking is the key to a successful business,  and  being  willing  to  find  creative solutions even if it might  mean  more  work  will  help  your business greatly in the long run.

4. People trust others who seem to know what they’re doing

The old saying “fake it ‘til you make it” is especially true in business. If you do your best to think, feel, and act like an entrepreneur, people will treat you like one. By channeling an entrepreneurial mindset, you’ll be able to make new contacts with ease.

5. .Thinking like an entrepreneur will enable you to take healthy breaks

Successful entrepreneurs know that focusing entirely on business is a sure-fire way to burn out.  Go on an international trip. Relax and visit new destinations.  You might be surprised by the ideas and inspiration you can get by experiencing new cultures. If you’re thinking like an entrepreneur, you’ll know that taking regular breaks will actually benefit your business in the long run and that you needn’t feel guilty for indulging once in a while.

The benefits of this mindset extend well beyond entrepreneurship. The ability to learn from failure, think creatively and identify opportunities can foster success in all parts of your life, even if you never plan to start your own business.

“To me, the entrepreneurial process and entrepreneurial mindset do not just need to be confined to business situations in general and new ventures specifically,” Livengood said.

This entrepreneurial  way  of  thinking  can  help  you  start  a  side  hustle, lead  innovative ventures  at  your  current  job  and  be  a  better problem solver in your personal life.

Just as important, the entrepreneurial mindset can make you more adaptable to the rapid changes in today’s job market.

“Those who are able to identify problems or opportunities and then work to generate creative solutions to those issues can also improve situations in their personal lives,” Livengood said. “This can benefit the lives of those around them as well.”