2 min read

Reduction in the unit cost

I was with one of my clients - a fabricator for oil & gas filtration modules. He is in business since 1990. Pre-covid his company revenue was around 80CR and presently it is 25 CR. Apart from loss in revenue, the bidding of the project has become much more competitive at least by 30% reduced prices than pre-covid times.External factors have created lot of pressure on cash flow & profitability of the firm. I was helping him for reduction in the unit cost of projects.

In that context, I went to one of his fabrication sites and monitored the process for a full day. I got a chance to interact with the site in charge too.

After coming back, I was full of data & thoughts. The biggest question was where to look for cost reduction. Based on my learning as a business excellence assessor - I started listing all the key processes at site. I finally decided that it is best to start with customer-facing processes whereby thru modifications we can enhance the customer value as well reduce the cost.

I chose 4 processes -

  1. welding process
  2. welding non-destructive tests process
  3. Morning sequencing process by the site in charge
  4. machines downtime and repair process

Systematically, collecting measures for all the processes, I could pinpoint the areas which we need to redesign so that the overall cost of the firm can be reduced. The value add for the customer is that the overall process becomes faster and the customer will get a good quality product at least 1 week before the committed time.

The message, I would like to convey to all SMEs is that the unit COST REDUCTION is a need of the hour for you to become competitive in the market. Please get in touch with me in case you need help in the unit cost reduction in your activities.

If you have experience in the unit cost reduction activities - please share in the comment section below.

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