A recent magazine argued that companies on average waste 40% of every labor dollar (direct AND Indirect) because they either have no Strategy and/or the decisions that are made daily don;t align with their strategy. So what is this costing you? here's a quick formula for you to use.
Take your labor spent from your income statement and multiply by 40%. That's what is being wasted due to mis-alignment.
Take the result from number 1 above and divide it by your company's profit margin. This result is how much you'd have to sell in new sales to get back what you're losing in mis-alignment.
Look at how much you'd have to increase your sales from number 2 above from your current sales level and ask yourself if it's easier to try and sell all this new business or get a strategy and align your activities.
If you're interested in a supply chain simulation that helps teach this to your folks, check out my website and request a demo round. Mention my name in the referral and I'll give you a discount on training.
PS: It would be fun to share what you find for results from above and see how big a deal this actually is
CSCP, CPIM, CLTD, CHSCA, CSSC, CPIA
FOUNDER, THE GURU OF BIZ
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WE HELP SUPPLY CHAIN PROFESSIONALS MAKE MONEY, SAVE MONEY, AND FIX PROBLEMS WITHOUT PAYING BIG FEES
Chuck Nemer is a trainer/consultant with 40 years of experience in Supply Chain Management, Lean, Leadership, and APICS. He currently works with approximately 50 universities and 3000 students annually in supporting the use and play of the simulations in the classroom. Within those 40 years, he has taught, and continues to teach, professional certification classes for APICS, professional development seminars and programs on his own, and on behalf of colleges in their outreach programs to local and regional manufacturing firms.
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