Electric Power Systems Research 55 (2000) 49 – 56

www.elsevier.com/locate/epsr

Management of loss reduction projects for power

distribution systems
Emad S. Ibrahim 1
Faculty of Engineering, King Abdul Aziz Uni6ersity, Jeddah 21413, Saudi Arabia

Received 20 April 1999; accepted 17 August 1999

Abstract

Reducing the losses of power distribution systems (technical and non-technical losses) is an absolutely necessary objective in the
sound management of any electrical utility and a major stake for the countries concerned and the lenders. The paper describes
the context of losses in power distribution systems and deals more specifically with the corresponding diagnostics and
implementation of losses reduction plan. This paper has developed a precise and effective technique and method for the analysis
of the loss reduction problem and for the subsequent development of action plans to solve the overall problem, through a systemic
approach. © 2000 Published by Elsevier Science S.A. All rights reserved.

Keywords: Losses reduction; Technical losses; Non-technical losses; Power distribution systems; Management

1. Introduction different sub-projects of varying size and profitability

The losses in power distribution systems can be
classified as technical and non-technical losses. Whether
losses are considered ‘technical’ or ‘non-technical’, re-
ducing them is an imperative requirement for any elec-
tric company, because if they exceed certain ‘allowable’
levels, they can actually endanger the company’s finan-
cial status. Of course, the losses concern the entire
power systems, from production through transmission
to distribution; but the discussion is mostly oriented
toward losses in the distribution networks, where most
of them occur.
The technical losses are related to energy distribution
process while the non-technical losses are related to the
customer management process.
This paper develops a technique for the analysis of
the losses reduction problem and for the subsequent
development of action plans to solve the overall prob-
lem, through a systemic approach. The losses reduction
plan is a medium-term investment project, with its
E-mail address: zcc3875@kaau.edu.sa (E.S. Ibrahim)
1
On leave from Helwan University, Cairo, Egypt.
which calls upon the many and varied skills within the
company and which also deals with the relations with
the external environment. The following are the main
items, which must be conducted during the loss reduc-
tion project:
1. Measuring and evaluating the losses which is a
complex problem with technical, economic and ac-
counting nature.
2. The diagnosis which allows to determine the level
and the origin of the losses.
3. The recommendations, which propose the actions to
be undertaken inside and outside the company, to
reduce losses to a tolerable level.
4. Implementation of a tried and tested methodology
resulting, in particular, in the drawing up of a
schedule of actions to be carried out to conduct and
mark out the project.
5. Determination of the economic profitability criteria
for the choice of the actions to be undertaken.
6. A stringent management system, for the follow-up
of the actions undertaken and the assessment of the
results obtained in financial and institutional terms.
7. Implementation of a maintenance program to main-
tain and consolidate the results obtained.

0378-7796/00/$ - see front matter © 2000 Published by Elsevier Science S.A. All rights reserved.
PII: S 0 3 7 8 - 7 7 9 6 ( 9 9 ) 0 0 0 7 3 - 5
50 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
2. Definition of losses
The problem of losses may be illustrated as shown in
Fig. 1 that explains the functional process and the
losses generated at each stage of the technical and
commercial management of a distribution company.
The operator of a power distribution system receives or
purchases the amount of energy (A) needed to meet the
customers’ demand (D). His task is to manage this
energy and see that it is conveyed to each customer.
The financial resources of the operator come from
the energy billed (F) to each customer (i.e. the product
actually sold) and the effective payment of the invoices
which is the amount of energy (C) indicated in the
invoices collected. The ideal situation would be for the
quantities A F C to be equal. However, energy A
received by the distribution network is always higher
than energy F billed to customers, itself higher than
energy C which is effectively paid.
The interest of any operator is therefore to reduce
system losses. To do so, he has three means of actions:
Fig. 1. Technical operation and commercial management.
1. Buy the amount (A) strictly necessary to meet de-
mand (D): to achieve this, he must design and
operate the power network in a technically optimum
way to reduce the losses to a minimum natural level,
linked to physical phenomena.
2. Maximize billed energy (F): the operator must de-
sign and operate a customer management system
enabling him to assess the energy consumed by
customer and to invoice it accurately and then add
up the total amount. A customer who has been
‘forgotten’ or ‘not billed’ means the loss of mer-
chandise and consequently a financial loss.
3. Maximize paid energy (C): one therefore has to
monitor the payment of invoices, conduct actions to
compel defaulters to pay as quickly as possible,
manage accounts receivable so as to reduce unpaid
energy to a minimum.
The technical losses result from active and reactive
energy in the networks during the distribution process.
The quantity of technical losses depends on the charac-
 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
Table 1
Indicative values for percentage of lossesa
System losses Organization
L = TL+CL1
LB10% Excellent organization
L = 10% Good
10%5L515% Correct. Significant commercial losses
15%5L520% Improvable organization. Major commercial losses
20%5L530% Defective substantial losses
30%BL Exceptional situation linked to a crisis in the power sector.
Highly deficient organization
a
Compared to the energy supplied to the distribution network.
teristics of existing facilities and their mode of operation.
The non-technical losses or ‘commercial’ losses result
from more or less serious dysfunctions in the process of
metering, reading, accounting, invoicing and collection
for energy consumed by customers. Their extent directly
depends on the quality of the customer management
chain. The non-technical losses may be classified into two
major groups:
1. CL1 Loss: unbilled energy corresponding to energy
that has actually been consumed, but not recorded or
inaccurately recorded in the distribution company’s
billing system. In other words, CL1 loss is generated
by dysfunctions, or even deficiencies, in the compa-
ny’s billing system.
2. CL2 Loss: unpaid energy, originating from collection
losses induced by the absence of payment or a delay
in the payment of invoices issued.
3. Average loss levels
The voltage limits between transmission and distribu-
tion after differs from country to country. In this paper
the voltage level, for calculation of distribution losses, is
up to and includes the 20 kV network voltage level.
Table 1 shows an indicative values for percentage of
losses compared to the energy supplied to the distribution
network only and not to the energy supplied to the
overall power system. For the losses of a distribution
system (TL+CL1), 10% is estimated to be a technically
acceptable level. Some companies, in Western Europe,
Japan and North America, manage to reach only 5% by
investing to a considerable extent in networks and the
customer management system. For many countries in the
world, 10% in distribution system losses remains an
objective that is difficult to reach. Commercial losses
CL2, linked to the quantities of unpaid energy, are
usually recorded directly in the form of accounts receiv-
51
General action
Efforts to maintain the level and vigilance
Major investment required if losses are to be reduced fur-
ther. Effort to maintain the level
Improvement possible in the existing structure. Maintaining
the targeted reduction
Partial reorganization sometimes is necessary. Establishing
the loss reduction as a strategic project and mobilizing the
company
In depth reorganization. A strategic project is necessary.
Support of authorities is necessary
Reconstructing the company from the ground up, with the
authorities
able, measured in currencies or days (months) of sales
revenue. Forty-five days is an acceptable value for a great
many companies in developing countries. Finally, it
should be noted that when CL1 losses are high, CL2
losses are as well, thus confirming the company’s serious
dysfunctions.
4. Losses reduction gains
The high rate of technical and non-technical losses
generates:
1. A reduction in revenue resulting in cash difficulties,
with all the ensuing economic consequences.
2. Costly, useless or premature investments
3. Poor quality of service offered to customers.
Major losses drive the authorities to subsidize the
company thus increasing the states’ financial load. Re-
ducing the losses and reaching an acceptable level will
restore the confidence of lenders and private investors to
encourage them to participate financially in the develop-
ment of the power sector. The gains resulting from loss
reduction can be classified to: economic and financial
gains and institutional benefits.
4.1. Economic and financial gains
The economic and financial gains can be classified into
two kinds:
1. with constant consumption, the reduction of techni-
cal losses makes it possible to cut down generation
and therefore save on investments and fuel (with
constant generation).
2. with constant generation and consumption, the re-
duction of non-technical losses helps increase the
sales revenue.
Thus, the reduction of technical losses leads to a real
gain in energy and reduced capital-intensive invest-
52 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
ments. It therefore benefits the country’s economy. The
reduction of non-technical losses not only improves the
financial balance of the company concerned, but also
the load curve by subjecting consumption to the tariff
regulation.
Another way of stating the main benefits may be as
follows:
1. reduction of cost prices (with regard to the kWh
sold operating costs), improvement of accounting
results and financial stability of electrical utilities.
2. improvement of the quality of supply and service
offered to customers.
3. optimization of investments and improvement of the
environment (reduction of the pollution of power
plants, more efficient use of financial resources,
rational use of energy and tracking down customers’
waste of energy).
4. it should also be noted that when a company has
stringent management, it can legitimately require
the same stringency of its customers.
4.2. Institutional benefits
Excessive losses are a synthetic indicator of more or
less serious dysfunctions in the Distribution Company,
affecting in particular organization, management and
skills. When the loss reduction project is a success and
losses have been brought down to a reasonable value,
the success is therefore the proof that the actions for
reorganization, managerial change, training and moti-
vation of the personnel have been efficient, at the same
time as the technical actions themselves.
Not only must one therefore seek to reduce the
losses, but also endeavor to teach the company to
continuously struggle to reduce losses. A distribution
Table 2
Main causes of non-technical losses
Non-metered energy (consumption losses)
1 — illegal connections
2 — delay in the installation of meters
3 — metering equipment tampered with
4 — faulty meters
5 — estimates of effective consumption too low
6 — faulty connections
7 — unadapted metering equipment
8 — customers not taken into account
9 — meter reading errors at the reading level or
erroneous index transfers
company that succeeds in controlling its losses may be
used by the Public Authorities as a model to be fol-
lowed for the other infrastructure departments: water,
post, telephone, etc. A successful loss reduction project
is a factor for progress in the country’s infrastructures.
5. Non-technical losses
Non-technical losses are not inevitable. They must be
identified and fought with eradication objective by all
electricity distribution companies concerned about
sound management. The problem caused by these non-
technical losses is in many cases so serious that it is a
major, even vital, priority for the companies involved.
To determine the level of non-technical losses, one
starts with the energy supplied to the distribution net-
work from which are subtracted the technical losses on
the same network. Thus we reach the notion of effec-
tively consumed energy. Part of this consumed energy is
not invoiced. The unbilled consumed energy is the
primary component of non-technical losses. When one
considers effectively invoiced energy, one notices that
part of the invoices are collected late compared with the
limit payment date fixed by the distributor. The finan-
cial expenses generated by the unpaid invoice portfolio
may be substantial.
By definition, it is considered that the global value of
the non-technical losses borne by the company com-
prises the cost of the unbilled consumed energy, to
which are added the financial expenses induced by the
management of the customer debt and the amount of
irrecoverable invoices.
Table 2 shows the main causes of non-technical
losses, which can be classified, into three major groups:
Unbilled energy (invoicing errors) Unbilled energy
(collection losses)
(A) incorrect customer file (A) unpaid invoices
1 — insufficient or erroneous contractual information 1 — non-distributed
invoices
2 — non-conform metering coefficients 2 — customer payment
difficulties
3 — faulty updating of the file 3 — unadapted collection
procedures
4 — poor management
of unpaid invoices
(B) incorrect invoicing (B) payment management
1 — customers not billed because of a lack of 1 — misappropriation of
knowledge and follow-up payments
2 — absence of follow up of customers who benefit 2 — payment losses
from special or free tariffs
3 — absence of follow-up and reports on invoicing
incidents
4 — absence of check of rectified invoices
 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
1. Consumption losses corresponding to energy actually
consumed, but not recorded or inaccurately recorded
in the distribution company’s invoicing system.
2. Invoicing losses generated by dysfunctions, or even
gaps in the company’s invoicing system.
3. Collection losses generated by non-payment or delay
in the payment of the invoices issued.
6. Technical losses
Energy and power losses in electrical networks result
from the very transit of energy, and are therefore
intrinsic to transmission and distribution. So they are,
physically speaking, unavoidable. They can be reduced,
but not suppressed completely. The causes of these losses
are:
1. contact resistors and conductors, where ‘Joule’ losses
are found.
2. transformer plate magnetization, where ‘iron’ losses
are found.
3. auxiliary supplies needed for operating transformer
stations or network automatic systems, which are the
cause of parasitic consumption.
4. major unbalances between phases on LV networks.
Losses have an effect on investments (mainly genera-
tion) and on product quality (causing possible voltage
drops and cutoffs in the face of demand).
As energy is measured only at the input or output of
the electric system, the only way of determining how
much energy is lost at each voltage level is to determine
physical quantities that result from measurements (of
current, maximum power) taken in the network at
properly chosen moments, and statistics that are charac-
teristic of customer consumption (load factors at the
various voltage levels). So, measurements campaigns are
indispensable for determining the:
1. local current intensities and (active and reactive)
power peaks.
2. share of each voltage level in the national (and
sometimes regional) system peak.
3. load factor at each voltage level.
Mathematical laws using load factors and participa-
tion factors in the system peak of each network compo-
nent can then be used to determine the:
1. energy losses at each voltage level (from the power
losses at the local peak).
2. share of each voltage level in the system peak power
losses (national or regional).
7. Implementing loss reduction projects
The loss reduction projects may be broken into three
major phases:
53
1. the diagnosis of the existing situation, identification
of losses and their main causes.
2. recommendations, with the writing of an Action Plan
to reduce the detected losses.
3. implementation of the action plan and measurement
of the results obtained.
Even when an external consultant participates in
drawing up the project, the company management
should be closely involved in all these phases, as part of
a complete learning process, because the implementation
of the Action Plan and lasting value of the results
depends entirely on them.
8. Conducting a non-technical loss reduction project
8.1. Diagnostic phase
This phase may be divided into two parts:
1. The audit of the general conditions of the customer
service, which will take place at the company’s head
office.
2. The analysis of the practical implementation of each
of the activities attached to customer management,
which will take place partly at the company’s head
office and partly ‘in the field’, in the operational units
chosen by common consent.
A typology per nature of customers, regions and
geographical areas must be studied. The results of the
analysis carried out by the project team are set out in a
detailed report which clearly indicates the level, nature
and value of the losses identified, as well as their main
origin. These conclusions are presented by the project
team to the company’s management before the following
phase gets under way.
8.2. Drawing up the action plan
The purpose of this phase, which follows from the
preceding one, is to determine the actions to be imple-
mented to reduce non-technical losses and classify them
according to a short, medium and long-term plan, while
taking into account their technique-economic interest for
the company.
To compare the profitability and efficiency of the
actions proposed, the experts use a homogeneous
method based on notions of discounted profits and
return time on investments. The proposed action plan
consists of the following indications for each of the
recommended actions: urgency, expected efficiency,
global profitability, implementation time, required re-
sources (such as data processing hardware, vehicles,
metering equipment, training or hiring of personnel).
The company thus has all the elements at its disposal to
assess and select the most efficient actions, according to
the company’s specific political and economic criteria
and constraints.
54 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
Two examples help illustrate the type of action un-
dertaken as part of a loss reduction action plan:
1. if the metering of the energy supplied to customers
proves to be unreliable as shown by the diagnosis. An
on-site check will have to be carried out and the
technical and administrative level of all the metering
equipment of major customers upgraded (MV and
major LV consumers).
2. if the information in the customer file is generally
missing or erroneous, there is good reason to perform
an on-site inventory of all electricity consumers and
the creation of a reliable and complete file.
Other actions may concern management, organiza-
tion, procedures, or even the company’s legal
environment.
8.3. Implementing the action plan
The objective of this phase is to implement the action
plan with the assessment and follow-up of the results
obtained. During this phase, cooperation between the
company and the consultant, which must come within a
clear contractual framework, may take on extremely
varied forms: training, advisory actions, management
of the project, secondment of temporary or resident
experts, etc. The three main concerns in accompanying
this phase are as follows:
1. Assistance adapted to the context.
2. A real desire for the transfer of know-how
3. Durability of the progress recorded. Indeed the fight
against non-technical losses is a long and exacting
task. Great vigilance is constantly required and a
major amount of equipment and means must be used
(metering equipment, invoicing data processing, cus-
tomer file, and training, internal and external commu-
nication).
It is highly recommended that the project team be set
up at the beginning of the operation, remain mobilized
for the implementation of the action plan, by carrying
out its role of supervising the control and training of the
players concerned. This project must include continuous
monitoring to see that the planned schedule has been
complied with and follow-up of the results obtained by
comparing them with the objectives laid down.
9. Technical loss reduction project process
Even if technical losses are more clearly definable
than ‘non-technical’ ones, the process of reducing them
still has to become a true corporate, too. This process
involves: (a) a string determination on the part of the
company’s management; (b) the designation of a pro-
ject team with means and objectives; (c) implementation
of a proven methodology; (d) determination of
profitability criteria for choosing actions to be under-
taken and (e) a strict management organization for
following up on actions and their results.
9.1. Diagnostic, measurement and e6aluation phase
The objectives of this phase are:
1. Assess losses at each voltage level.
2. Detect abnormal points of loss.
3. Determine their causes.
4. Evaluate overall technical energy losses, broken down
by voltage level.
5. Deduce the level of non-technical losses.
6. Establish the system peak power balance, broken
down by voltage level.
7. Evaluate the cost of the lost kilowatt at peak, by
voltage level and as a function of the load factor.
8. Establish the financial balance of energy transfers.
9. Deduce the cost of non-technical losses.
The stages of diagnostic phase are:
1. Assembly of project team; surveys of available data;
collection of general statistics.
2. Methodological, development, with initiation of data
collection and measurement campaigns; analysis of
medium and low voltage networks sample selection
criteria; preliminary choice of geographic areas to be
studied.
3. Collection and data entry of general network
characteristics.
4. Selection of samples and initiation of data collection
concerning them (MV and LV line and MV/LV
transformer characteristics); data collection for HV/
MV substation transformers.
5. Validation of data collected and entered; collection of
economic data to evaluate the cost of losses.
6. Computation of losses on medium and low voltage
networks.
7. Validation of loss calculations.
8. Establishment of various balances (energy, system
peak power, etc . . .).
9. Calculation of the cost of peak kilowatt lost.
The methodology generally applied by the project
team during the diagnostic phase is based mainly on three
elements:
1. The sampling by voltage level is based on the appli-
cation of families of works, each having a homoge-
neous behavior with respect to losses.
2. Network computation tools.
3. The cost of the losses is computed by the marginal
development cost method.
9.2. De6eloping the action plan
Depending on the scope of the mission entrusted to the
project group, its conclusions will be expressed in one of
the two following forms:
 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
1. It will state its advice and recommendations, includ-
ing the type of operations and volume of invest-
ments to be made in order to reduce technical losses
to an acceptable level. The investments will be eval-
uated by extension of the stated volume on the
samples.
2. If a more complete operation is planned, the group
will propose an action plan with dates and figures,
listing the operations on a schedule, in accordance
with the company’s possibilities and constraints, so
that the company can integrate these operations in
its projects and its budgets. The investments will be
evaluated by processing the whole network full
scale.
In either case, the group will draw up a list of urgent
measures to be taken with the immediately available
means.
9.2.1. First phase of action plan: plan of urgent
measures
This includes quick actions to be taken with no
major investment involved. These actions, which consist
in improving the operation of the existing system, are
essentially:
1. optimization of the network operation scheme un-
der normal and backup conditions (certain com-
puter programs can render the network’s minimum
loss configuration).
2. optimization of HV/MV transformer use.
3. optimization of existing capacitors bank use.
4. suppression of weak points in the network, caused
by high overloads (shifting of loads).
5. adjustment of MV voltage.
6. adjustment of LV voltage.
7. rebalancing of LV networks.
9.2.2. Second phase: action plan itself
This includes actions requiring investments that can
be implemented in the medium term, along with longer
term decisions supported by detailed technical and eco-
nomic planning analyses. This must contain a list and
schedule of the necessary investments, compatible with
the companies budgetary possibilities. Some of the pos-
sible actions are:
1. Modification of the electric network structure.
2. Installation of capacitors bank in HV/MV stations
and in MV networks.
3. Encouraging MV customers to correct their power
factor.
4. Backup of HV/MV stations and MV and LV
networks, with possible creation of new networks.
5. Optimization of the purchase and operational
management of HV/MV and MV/LV stations and
MV networks.
6. Use of on-load regulators in HV/MV stations and
MV networks.
55
7. MV or LV voltage changeover.
8. LV network balancing.
9. Fallback on independent local production.
10. Revision of planning, works dimensioning, mainte-
nance or servicing mode standards.
11. Adaptation of tariffs to discourage consumption
during peak hours.
9.2.2.1. Action classification methodology. The method-
ology applied should be based on a hierarchy of actions
to be considered, guided by technical and economic
criteria. The basic ideas used are the discount rate,
losses cost, and discounted profit. Different projects can
be compared using the investment return time and
profit cost ratio. The actions retained should have
either an acceptable return time or a profit cost ratio
greater then the discount rate.
Losses cost, which is an indispensable element in
evaluating the expected benefit of a project, can be
determined using the annual cost of the peak kilowatt
lost. This method is based mainly on the computation
of loss rates and marginal network development costs
at each voltage level, and can also be based on an
in-house tariffs study. It evaluates the cost of the losses
generated over 1 year by the loss of a kilowatt at the
special moment of peak consumption. This technique
avoids having to consider each kilowatt-hour lost in its
tariff context.
Network electrical analysis should cover a period of
5–10 years, because reducing electric system losses is an
action to be viewed and implemented in the medium-
term, so that the required investments can be
amortized.
9.2.2.2. Means and tools used. To write a rational
Action Plan, relatively large network computations are
needed. The contribution of a computer system is deci-
sive here. No suitable actions can be proposed without
excellent technical management of the works. With the
computer facilities available today on the market, rapid
progress is possible and, above all, the necessary invest-
ments can be optimized. Many electric companies have
the software needed to plan their medium-and low-
voltage networks and to compute losses.
9.2.2.3. Action plan de6elopment phase. The develop-
ment phase can be broken down as follows:
1. development and evaluation of medium-and low-
voltage reinforcement projects for the whole
network.
2. classification of projects by order of decreasing
profitability.
3. evaluation of the total amount to be invested; com-
parison with the profitability threshold set by the
financial backer; and determination of losses after
works.
56 E.S. Ibrahim / Electric Power Systems Research 55 (2000) 49–56
4. establishment of short-term works program and
schedule.
5. simulation of energy and peak power balances be-
fore and after works.
9.2.2.4. Durability of results. The economic analysis
(even if it is based on a simulation on a 5 – 10 years
scale) will not provide a basis for making good deci-
sions concerning more than the first few years, because
the system may actually evolve quite differently from
the initial prediction. So it is useful to update the study
periodically. If the company decides to maintain the
loss level at an economic optimum in time, it will have
to acquire an elaborate organizational and methodolog-
ical structure, forecast system, data collection process,
and computer systems. The corresponding tools for the
given context and requirements already exist and can be
made available, along with the initial training and
adequate accompanying services.
9.3. Implementing the action plan
The object of this phase is to apply the Action Plan,
with follow-up and evaluation of the results. It is
generally up to the company to implement the recovery
plan, which may require exceptional funds and means.
Often, a local Action Plan head should be named, who
will participate in the measurement and evaluation
phase and in writing the plan.
The company’s personnel has to be involved right
from the beginning of the project, with training in
methodology and the use of the tools, and participation
in the corresponding activities (data collection, mea-
surements, calculations, and so forth). The main con-
cerns in the accompaniment of this phase are:
1. Suitable assistance.
2. Persistent commitment to transferring know-how.
3. Critical analysis of progress achieved.
4. Durability of the results.
The project team assembled at the beginning of the
operation must remain actively involved throughout
this phase in order to supervise and coordinate the
activities.
10. Conclusions
1. The reduction of losses is a major priority — even
a vital one in some cases, for electrical utilities, for
the community as a whole and for the lenders.
Reaching an acceptable loss level will restore the
confidence of lenders and private investors to en-
courage them to participate financially in the devel-
opment of the power sector.
2. The management must organize the reduction of
losses as a genuine investment project sometimes to
be conducted over a period of several years.
3. A loss reduction project may practically concern all
the economic and social players of a country: public
authorities, consumers and customers, the company
as an institution, personnel and lenders.
4. The losses reduction project must comprise
4.1. The objectives to be reached.
4.2. A study of the benefits and costs.
4.3. Clear implementation stages.
4.4. Organization and means.
4.5. Results measurement system.
4.6. The risk and/or uncertainties.
5. The losses reduction project can be broken down
into three major phases:
5.1. The diagnosis of the existing situation, identifi-
cation of losses and their main causes.
5.2. Establishment of an action plan so as to reduce
the detected losses.
5.3. Implementation of the action plan and follow-
up of the results obtained.
6. Not only must the company seek to reduce the
losses, but also endeavor to continuously struggle to
reduce losses.
7. When an external consultant participates in drawing
up the project, the company management should be
closely involved in all three phases, as part of a
complete learning process, because the implementa-
tion of the Action Plan and the lasting value of the
results depends entirely on them.
8. When an external consultant is a factor for success.
Indeed he provides:
8.1. An externally and necessarily new view.
8.2. Neutrality indispensable to the carrying out of
the project.
8.3. Wealth of experience and solutions acquired in
various contexts.
9. This paper recommends reducing the losses
based on strict technical and economical rules,
which are generally reflected in an action plan, with
each action item supported by a profitability
analysis.