Today’s Gremlin – Cheap Charlie, is a well intentioned but often mis-guided Gremlin. He or she can be many people and we’ve all dealt with them before. “Cheap Charlie” is someone who truly believes that not spending leads to profits. This is one of the many gremlins we talked about when we introduced this series of articles.
Penny Wise and Pound Foolish
Accountants and others know that a dollar saved from expenses goes straight to the bottom line. In our day-to-day lives we all like to spend less for whatever we buy. In business it increases profits. At home it reduces the drain on a finite pool of available cash. There are always opportunities to “save” money. We all see them, and many of them, like those we see at home, are on a small scale.
In business however, what looks like a saving might actually result in an increase of spending elsewhere. Maintainers re-use old parts thinking they are fine because they look fine – but what about accumulated stresses and fatigue? If that re-used part breaks prematurely you’ve increased downtime and lowered output. Purchasers buy the lowest priced option, but what if it can’t do the intended job as designed? Your maintainers who have asked for the part usually don’t know those design parameters. Are a few dollars saved by buying the “or equal” variation that may not be truly equal a good investment if that cheaper part breaks sooner and causes more downtime? Is the cost to cannibalize parts really less than the cost of buying the right part? Is the risk of using the old cannibalized part truly justified?
He’s everywhere
Today’s Gremlin – “Cheap Charlie” is everywhere in your organization. He can be a maintainer re-using an old part, and operator taking a short cut, a buyer purchasing the cheapest he can find, a manager opting to save money by not sending people for training.
We all see these little opportunities and we believe we are doing well if we save a dollar here or there. Even “lean” programs where elimination of waste, or “muda”, is practiced, there is a tendency to be penny wise. It’s not necessarily all bad, but sometimes it can also be “pound foolish”, ultimately costing the organization more in terms of both offsetting costs when things go wrong, and loss of revenue when downtime is excessive. What’s needed is a balanced look at those opportunities to save by cutting costs.
Are you really saving anything?
When a cost saving opportunity presents itself, pause for a moment and consider the cost of NOT saving that money? What could go wrong if, by cheaping-out, things don’t work out as you expect. What if that cheaper part isn’t really good enough? Do you take your suppliers’ word (who’s trying to make money), or your maintainers’ (who’s trying to keep your operations going)? Is all that effort to cannibalize parts from old equipment really worth it for a part that might not be needed, just to save buying a new one sometime in the future? If your people don’t get that training, will they really know what they are doing as well as they should, or are you leaving yourself open to errors like they made before?
“Cheap Charlie” pops up all over your operations. Be aware that he wears a very seductive disguise – cost savings, but works very well with Murphy’s Law.
In our consulting work we often run into the undesirable effects of “Cheap Charlie”. The consequences are usually obvious, but it can be challenge for any organization to admit that it’s fallen pray to this pervasive and seductive Gremlin.
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