"Infinite Cost Reductions"?

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asahi.com:Rises in efficiency reduce factory personnel – ENGLISH:

From the article:

“Toyota Motor Corp., one of the nation's most profitable and efficient manufacturers, is leading the charge to cut costs.

In a speech to company managers in July, President Katsuaki Watanabe said that ‘the possibilities of cost reductions are infinite.'”

I hate to nit pick with Toyota, maybe there was a translation issue with this news source. But the comment reminds me of something that, I think, Dr. Eli Goldratt (of Theory of Constraints and “The Goal” fame) said, that you can only cut costs to zero, but you can increase revenue infinitely.

I think the point was that if you improve on-time delivery, response time, and (I assume) quality, that you could increase sales far more than you could ever cut your costs. Your costs have to hit an absolute zero, which is hardly infinite.

If Toyota's president meant “We aren't done cutting costs and still have a long way to go”, then right on. I probably shouldn't take him so literally.

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.

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