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PlasticsToday’s Management Blog: Getting to an improved bottom line

As the shift to a more global marketplace continues and with it the use of international quality and financial reporting standards, the importance of bringing together professional accounting and manufacturing with experience will become even more pronounced. Company-wide process improvements contribute to financials and affect the P&L (profit and loss) by reducing the cost of operations, production and transaction.

For example, production processes affect quality/the environment, and the bottom line. Molding and extrusion machines, paint lines, energy use and landfill waste affect air, water, and soil issues. Companies around the world have been discussing quality and environmental questions since the 1960s and today successful firms typically run their manufacturing operations through a "quality/environmental kaizen" survey to find ways to improve production that also save energy and reduce waste.

Such a survey operates much the same way as their other lean-manufacturing surveys, which aim to streamline time and costs. It is not unusual for manufacturers to realize $500,000 in annual savings. For instance, after a successful survey many plants no longer need send their waste to landfills, cutting costs otherwise needed to haul trash.

Combining the Sarbanes-Oxley Act (enacted on July 30, 2002, to set new or enhanced standards for boards of public companies in the U.S.) and elements of ISO 9001 and ISO 14001 quality and environmental management standards can provide a powerful tool for elevating the quality assurance function status in many U.S. companies, including plastics processors. In fact, the additional opportunities presented to those engaged in operations management and oversight, normally a key component in the auditing process, can and should elevate most internal audits to the position of compliance tools for this legislation. Combining Sarbanes-Oxley and quality audits would be not only compelling, but also cost effective.

Remember, a compliant system of internal control ensures achievement of Sarbanes-Oxley and company-wide objectives such as:

1.    Effectiveness and efficiency of operations.

2.    Reliability of financial reporting.

3.    Compliance with laws and regulations.         

But who is willing to pay for it? If you are in charge of your company's quality and environmental implementation project, you will need to secure funding for the consultant's fees and other investment. Here is a suggested rule-of-thumb method for calculating the amount required - and for justifying it.

Look around your company and ask, "How much money could we save if we were to improve the following by 10% in relation to product output through our ISO 9001 and ISO 14001 implementation?" Then consider:

-       energy, fuel and general utility costs;

-       efficient use of materials;

-       cost of goods sold;

-       product/process time improvements, and

-       legal compliance costs

After you have made an estimate of what you might be able to save - in most cases 10% is quite a realistic objective - then propose to your senior management that you get at lease 20% of that figure for you to control as part of your ISO 9001 and ISO 14001 investment project.

About the author: Lewis Yasenchak works as a consultant with small-to-mid sized processors, moldmakers and other precision manufacturers to help them "implement quality at the source" rather than catch mistakes once made, and also to minimize waste by meeting and exceeding ISO Quality Management Systems. He invites you to contact him to help demonstrate the impact quality can have on your operations. Contact him at T: 706-694-2977 or [email protected].

TAGS: Business
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