Historically, most companies have viewed their EHS department as a necessary evil that must be retained to avoid regulatory infractions. However, some companies have shifted their thinking to include their EHS departments as profit centers through re-classifying wastes as revenue streams and identifying opportunities for cost reductions and cost avoidance. This transition is becoming more noticeable as companies implement ISO programs, look for ‘Greener’ products and attempt to reduce the use of raw materials. The following include techniques to demonstrate to executive managers that an EHS department can serve as more than just an overhead expense:
And, as always, DOCUMENT, DOCUMENT, DOCUMENT. Without an accurate baseline, results are hard to demonstrate.
Does your company create daily price quotes for customers to make a sale? If yes, which one of these landscapers most closely resembles your quote process?
Assume you want to contract landscaping for your home. You’ve found three companies that can do the work. You ask each to quote your job.
Instead of accepting the low bid, a wise move is to ask each how they arrived at their pricing.
Which one do you give your business and why?
Here’s what I would do? I’d tell each vendor that I might not be able to do the entire project and ask each one to rebid my job on a line-by-line basis.
I would then ‘cherry pick’ and see if by doing so I can come up with a total cost of less than the third landscaper’s original $950 bid. If I can come up with a lower total price, the “material-doubler” landscaper will undoubtedly lose money on what he sells me, the more rational one will at least turn a profit on the items he does sell me, and the third may or may not turn a profit on its portion of the sale.
If you don’t have a system similar to landscaper #2, customers will cherry pick you. They’ll buy things from you that are under-priced, e.g. you are losing money on them but you don’t know it. And you won’t sell the things you’ve overpriced that would be profitable at a lower, more competitive price.
I’ve seen scores of manufacturers with invalid cost models win major contracts on which it was impossible to earn a profit this way – some of which won enough of these contracts to put the company out of business.
Which landscaper pricing method does your company most closely resemble?
Evergreen Solar recently announced they are firing 800 workers at their Massachusetts factory and moving all solar panel production to China. The February 6, 2011 issue of Bloomberg Business Week interview of Evergreen’s CEO exposes how they could have prevented the firings.
1. Management built too big of a factory. 75% too big! If the company had used Lean principles, they would not have overbuilt.
2. Management took on too much debt to start the company. See #1 for a reason for the big debt.
3. Management ran out of cash. Cash is the lifeblood of any company, even profitable ones. China offered management cash in exchange for moving the jobs to China.
Everyone makes mistakes. Learning from mistakes is a key trait of successful leaders. What mistake provided you or your organization its greatest lesson?