While increasing profits is a key goal of most businesses, this is only really achievable when you can keep costs to a minimum while maximising efficiency in all areas of the business.

When business resources are all directed in the most efficient way possible, then the cost-to-profit ratio tips in favour of profit. One of the key ways to review how resources are allocated is to conduct a waste audit to review operational efficiency.

Every business has a certain amount of waste and, often, this is an unavoidable cost of doing business. But, when a business doesn’t know how much waste it generates or what that waste costs, then it becomes almost impossible to create the efficiencies needed to drive profits.

Toyota’s concept of Seven Wastes is a useful model for businesses looking to maximise efficiency:

1. Overproduction

Organisations often determine the level of goods production based on projected rather than actual demand. When inventory levels become too high, they reduce or stop production. This stop-start method is inefficient and results in unnecessary production, shipping and storage costs. By contrast, the famous Just In Time manufacturing process pioneered by Toyota lets companies manufacture goods as they are needed, based on actual demand. By changing the processes used by franchisees to match this Just In Time approach, franchisors can help reduce waste and improve efficiency.

2. Unnecessary inventory

Holding unnecessary inventory is a sure sign that the business is running inefficiently. It can disguise underlying issues like defects that require rework, poor communication, lack of teamwork or knowledge, and any number of additional problems. By reducing inventory levels, franchisors can expose these causes of inefficiencies and deal with them systematically.

3. Transportation

The cost of moving goods is unavoidable but this is an area where significant cost and time savings can be gained with the right approach. For example, better laid-out stores and factories, better inventory locations, more efficient use of subcontractors, lower rates of returned products, and negotiating better pricing and delivery schedules can all reduce the cost of transportation dramatically. Franchisors may find that a slight modification to delivery schedules, for example, makes a negligible impact on the franchisee’s ability to operate but yields a big saving.

4.  Inappropriate processing

When repetitive or simple tasks are done manually or by overqualified staff, time and resources are wasted. This applies to equipment, too. The cost of automating some systems or upgrading some equipment can often be recouped rapidly thanks to the resulting efficiency gains. In a services organisation, reducing waste through inappropriate processing may be as simple as reviewing job descriptions to ensure the most senior, valuable staff are not doing simple tasks that could be completed by junior employees. In a fast food franchise, for example, an automated drinks dispenser means staff can fulfil customers’ orders faster because they don’t have to manually pour the drinks.

5. Defects and rework

Defects can be expensive since they often mean wasted raw materials, wasted time and the need to re-manufacture the product or provide additional services. The cost of defects is often far higher than the cost of implementing a better system or adopting better technology to get the process right. Franchisors can help reduce defects and the need for rework by providing comprehensive, targeted training and ensuring all equipment is up to date and well maintained.

6. Waiting

Time is wasted when processes take too long, have too many steps or include a gap that isn’t filled in a timely fashion. This can include things like the need to import raw or finished goods, equipment malfunctions or delays in receiving information from other parties such as customers or suppliers. By reducing the wait time, the process becomes quicker and cheaper. Franchisors can address this area of waste by ensuring all materials are easily-sourced, that supplier agreements are strictly enforced, that processes are streamlined and that equipment is always maintained.

7. Unnecessary motions

Something as simple as the ergonomics of a workstation can significantly affect a worker’s productivity and efficiency. To take the fast food example again, a worker with clear, short paths between the cash register and the food can serve more customers per hour than one who constantly runs into other employees and has to go from one end of the counter to the other to fulfil the order. Franchisors can look at redesigning pathways and workplace layouts to minimise wasted movements.

Franchisors should undertake a waste audit to understand how each of these wastes affects the organisation, as well as how to overcome them. When waste is minimised, productivity and efficiency can increase, improving the bottom line.