A company’s priorities are a testament to its culture. Many can narrow down their driving focus to one of two concepts: cost or schedule. When an organization is driven by cost, the main goal is to keep internal costs from moderate to below average. Other companies may find themselves willing to budget in a way to ensure performance remains on or ahead of schedule. Most companies try to be both, but the end results may reveal that they are neither.
Safety, Quality, Cost, and Delivery (SQCD) is a concept widely used but not necessarily followed in the same order of priority among many manufacturers.
No one disputes the importance of Safety and Quality to be of the utmost importance; it is a moral obligation that these concepts remain the top two in order of priority. It is what follows, Cost and Delivery (Schedule) where discrepancies may occur. Often times, the two notions become departmentalized and subject to business unit interpretation of which concept is more important.
Many companies preach “Cost is King” but practice “Schedule Above All” which yields in neither being optimized. Some may argue that if you meet the schedule, you will meet cost and vice versa; this theory is faulty. In order to meet a deadline, companies often resort to overstaffing at the 11th hour which can lead to exceeding cost. When cost becomes an issue, many companies would introduce layoffs and restrict overtime, resulting in reduced throughput and missed deadlines. So how does a company resolve the ongoing battle between cost and schedule?
10 Ways to reduce Cost and Schedule Variances
- Start with realistic expectations and S.M.A.R.T Goals. Goals that are Specific, Measurable, Attainable, Relevant, and Timley prove to be more practical and effective.
- Deliver First Time Quality product. Rework is the #1 cause of increased cost and missed deadlines.
- Historical performance, practices, and trends should be examined when setting budgets and delivery dates. If your company performed at 80% for the last 3 years do not assume 95% performance will miraculously happen just because it is in the proposal.
- Make sure all Business Units (BU) are aligned. Focusing on Cost in some BU and on Schedule in others will result in missed cost and schedule for finished product
- Have Contingency Plans in place. The best plan is only 85% accurate and achievable, so allow for unplanned and/or uncontrollable delays; rework, downtime, snow days, union disputes and other tribulations.
- Keep your process improvement and step changes ideas private and out of proposals. No one will complain if you meet or exceed expectations and deliver on time and under budget.
- Evaluate the consequences of missed deadline vs. percent of increased cost.
- Understand what is causing cost and schedule variance. Address the problem at 15% completion, not at the 85% mark.
- Identify and plan for both Internal (within your control) or External (vendors and suppliers) factors that impact your cost and schedule.
- Most importantly, always remember: “If you do what you always did, you’ll get more of what you already have.” Seek outside help.