How Can I Drive 5% Improvement?

@karthikdharmalingam This was the same thing we used to do at Motorola. Customers would set up a product and require a 5% (must be a popular number) deduction in their cost – our selling price per year. We would target more so as their price went down our profit was increasing. If you are $5M then you need $250k.

If you take your product price and create a tree diagram backwards i.e first box is the cost to process a transaction. Cost splits up between labor, overhead and material. I assume material is negligible to how does labor split? If I have multiple places doing the same process, do they take the same amount of time (there is a high probability this will come down to processing time). Keep going back until you understand where your total cost id coming from.

You are probably taking a big hit from cost allocations by accounting since you have 300+ people. Do not be afraid to challenge those allocations. Most are just BS. If they tell you they cannot do it any other way the take whatever percentage of your reduction target is from their allocations and get management to set a cost reduction target for them as well. Do not let them drive you into that box that says you take it out of your cost but the accountants sit over here in the corner and don’t do anything – remind them they are part of your cost and they are non-value add.