Business Solutions for Your Profitable Future


cost reduction model - profit equation


Loss represents the wastage of resources. The loss component of business is usually overlooked unless a Total Quality Management system is in place to raise awareness. Following is a list of resources, the ways that they can be wasted, and a summary of how a Profit Improvement Process (PIP) can impact losses.

Resources that can be conserved to save money and improve revenues include:

  • Time
  • Money
  • People
  • Good will
  • Knowledge
  • Culture
  • Work environment
  • Materials & supplies
  • Work in process
  • Finished goods
  • Avenues of loss include:
  • Quality rejects
  • Insurance losses
  • Theft
  • Inefficiency
  • Time delays in product development
  • Lost or unrealized productivity
  • Employee turn-over
  • Strikes and slowdowns
  • Wastage
  • Spillage
  • Returns
  • Warrantee costs
  • Unretained (lost) customers


What PIP Does to Losses:

The Profit Improvement Process (PIP) identifies, quantifies, and prioritizes the areas of loss that your business is experiencing. Priorities are addressed to increase profits. Key points about loss management include:

  • Every dollar of loss that is removed reports directly to the bottom line.
  • The elimination or reduction of losses give an immediate and favorable impact to bottom line profitability
  • Reducing losses can increase sales - improved quality and/or productivity
  • Reducing losses often increases profits without any negative impact. Most often the impact is favorable as quality improves


Achieving World-Class Profit Improvement: See the world-class profit improvement processes. A must-have resource for any cost reduction practitioners.