Cost Containment Equals More Profit

Velocity Management in a Business is very easily a full-time job because Velocity concentrates on Cost Containment for the entire company so that as more jobs are taken on, and more are getting out the door quickly, on time to meet Customer demand, without more expense.

The goal of Velocity is the process of producing more Production at better Value for the Same Cost. Velocity is about Cost Containment.

We will be talking about  Velocity Management using LARGE examples to make obvious points beginning with manufacturing. However, Velocity applies to every single company on the planet. A day care center, a barber shop, a video company, An Accountant or law firm.

Velocity says that 100% Normal Monthly Revenue must be able to be achieved consistently with no more added people, or non-people expense. If it cannot, the company is operating inefficiently and wastefully.  If a 100% Normal balanced budget for two people is expected to be $20,000 a month only two people should be required to produce.  In a manufacturing environment, this might be called Six Sigma. In a service environment Velocity might be Clean the clutter.  In a Warehouse, Velocity might be Just In Time inventory instead of Just in Case inventory.  Whatever, the work environment, it all gets down to time management and anything and everything that interrupts the expected results within that time… nothing more, nothing less.

In a one-person business, when the person has 8,400 business minutes in a month to complete 4 workrooms single-handedly, 2,200 minutes a month should accomplish the tasks of the workroom.  When this occurs efficiently, you have Cost Containment, more output for the same cost. Do not confuse Cost containment – getting more for the same dollar –  with Cost Reduction – getting the same result for less money.  Cost Containment with Velocity is Management of Wasted motion, wasted time, wasted cost-added activities that do not add value to the product such as delivery, transactions, transportation of inventory and products, interruption of flow and so on. Velocity focuses on Problem Solving to find the root cause of the obstacles that impede production and cause internal as well as external Customer dissatisfaction.

There are six basic ELEMENTS that affect Velocity in all sizes and types of work environments. These are the 6 Ms:




Manpower, Measurements,

and Milieu (Physical space)

Velocity is gained when each of these components of the Value Stream achieves waste reduction and the elimination of the costs associated with non-valued added time and space.  The goal of Velocity is to achieve more production and greater value, without more expense.  In other words… Cost Containment…. getting more for the same costs.

Velocity creates Added-Value that must transform the Product in some way. If the product is not transformed, you have a cost-added transaction that must be eliminated. For example, by adding a paragraph to a legal document, you are transforming the document into something different of richer meaning and creating more value.  But if you just re-type the document, you are not adding value. That is a cost that should be eliminated.

Any of THESE activities that do not transform the Product or Service in some way, or that a Customer would be unwilling to pay for is a Cost-Added, not a Value added, Activity.

Processing is waste and does not add value. Velocity asks whether any process can be eliminated, reduced, combined, accomplished somewhere else, or the sequence be changed, or different materials used?  Can the process be re-engineered for standardization or a better, more efficient design?

Anything that causes Delay and Waiting is non-value-added and wasteful. Perhaps this is due to a poor layout, people specialization, poor quality or disorganization.

Overproduction is wasteful. When a company overproduces in anticipation of selling something is at risk of this never happening for any of ten reasons. Overproduction severely hampers a financial statement.

Unnecessary people motion is also a waste. Simple movement such as and delivery of an item to another room or work area that can be eliminated is a waste of time.

Transportation of Inventory is a waste. Inventory is money for items that belong on your family’s dining room table. Inventory is a statement that your Suppliers need better management.

Scrap and Rework are definitely waste from uncontrollable processes and poor quality.

Transactions are time wasters when they have redundant, untimely or irrelevant information or they are not critical to the fundamental communication of the activity.

Many business owners will state they have no waste.  Then, after thinking about it some, they begin to identify all kinds of waste in their business.  This is the very first step in improving velocity in your company.

Once identified, total waste should be eliminated by 7% per month until the business has achieved waste reduction of 90%.  Remember, the goal of Velocity is to remove all obstacles and Interruption to the Continuous Flow of a job.