Flavio Itavo (photo), turnaround specialist, details the dangers generated in processes in a world where competitiveness increases minute by minute, and the means of comparison between costs and the quality presented are much more efficient than just a few years ago. Knowing how to control and circumvent “hidden” costs is essential for the survival of any company.
The “hidden” costs should be considered as intangible, that is, difficult to read or analyze. Often they do not come as an invoice or receipt, for example.
Flavio Itavo highlights some examples:
• Commitment of People: it is essential that the company’s team is fully committed to the good results of the business. Uncommitted people generate errors, rework, losses, and waste. All of this is not easy to control, and sometimes a single employee can compromise the whole. There are dozens or hundreds of opportunities to do things in a more rational and appropriate way. A motivated and well-trained employee performs the process one way, 
while another who is neither motivated nor trained does it another way. It is necessary to align the entire process.
• Cost of Losses Due to Reprocessing: there are companies that do not control what has been reprocessed. They control the cost of everything, but do not control the productivity of machines and people. Almost everyone controls the costs of raw materials, and when raw material is lost, then the controls usually work. But how many people control how much labor was involved in production? Labor is a fixed cost, with a monthly calculation that is paid on the payroll. Therefore, what is allocated to each product is the result of a division between the total payroll and the number of units produced. The fact is that every time there is an error in the process and the same product is produced again, it may be that no more raw material is spent, since often it can be reused. But what compromises is the productivity of labor.
• Real Case of “Hidden Costs”: a gigantic film extruder was operating at high speed with a film that was coming out scratched and, therefore, unusable for sale. The operation was not interrupted and corrected because the employee preferred to wait for the entire roll to be used, instead of stopping and repeating his manual installation process. Throughout the process, thousands of square meters of film were lost.
The expert warns that companies need to be clear about how many hours are needed to produce a product or provide a service. There needs to be a comparison between what was planned and what was accomplished. There is also a need to control the hours. A good example is Brazilian shipyards that carry an average of 2MM man-hours for a large ship, while a Korean of the same size is manufactured with 1MM man-hours.
Everything related to customer dissatisfaction and unmet needs results in a cost, often hidden. Every time a product or service is delivered inadequately, we incur the greatest possible loss, that in which everything that was done within the business did not achieve its main objective, impacting the future of the business as a whole.
Learn more at the website www.flavioitavo.com.br
Source: Clozel Comunicação