A company which supplied hydraulic systems and pumps also earned a considerable proportion of its turnover from repairing and refurbishing pumps.
The operations manager was convinced that this part of the business was not profitable and needed to be either dropped or have its pricing restructured. Other members of the management team did not agree.
Les Haswell was asked by the operations manager to work with the management team to map the repair process and use the process map to calculate how much the process cost.
The team was asked to describe the process by which repairs were carried out, from the client’s enquiry, the subsequent quotation and the resultant repair procedure. The process was mapped and agreed by the team. Each element of the process was then analysed and elements were added to the map to show which departments or individuals were involved at each stage of the process. The time taken to carry out each element was also added. The cost of each of these involvements was calculated and added to the map.
By adding up the cost of each individual element, the total cost of the repair was calculated and then compared with the revenue generated by that repair. The management team was shown that with the level of rates charged for repairs, the company actually made a loss on most repairs of pumps under a certain size.
A number of cost cutting measures were suggested to the team, in an effort to cut down the number of needless involvements of departments and individuals throughout the process.