A 100% Increase in Profitability?
A 100% increase in profitability? Such a suggestion would excite almost anybody in the business.
But, believe it or not, it isn’t necessary to double sales volume to do it.
Actually, sales volume could remain the same, and profits could double!
How Is It Possible?
The cost of:
- Inefficient staffing and scheduling
- Idle time
in most companies is between 20 to 30 percent of sales. In some companies, it runs as high as 50 percent.
Let’s Take a Look
For illustrational purposes, let’s take a hypothetical company that has $100 million in sales. It typically earns $10 million in profits before taxes.
The cost of operational inefficiencies is 30 percent.
Translated, that means that the cost of mismatched staffing and scheduling, idle time, overtime and holdover costs the company $30 million per year.
With efficient operational management practices, assume that over time the cost of inefficient processing practices would be driven down to the 20 percent level.
The savings from improvements in operational efficiency are a cost avoidance or reduction in existing expenses and drop straight to the bottom line.
Now the cost of operational inefficiencies has dropped from $30 million to $20 million per year.
At the same sales volume, the company doubled profitability to $20 million per year.
We Can Help
For thirty years FTP’s Managing Operations Workshop has been providing instruction and mentoring participants on how to improve operational efficiencies.
To learn more call me at 469-535-3751, email or visit www.FTPConsulting.com.