Are there ways to reduce costs and operating expenses in the next 30 days, without trimming head count?
Jason Busch, Editor of sourcing, trade and supply chain blog Spendmatters.com says:
Tough times often call for tough actions, unfortunately many companies in the global2000 have to resort to layoffs as a result of the economic downturn. But, are there other ways we can aggressively and rapidly trim costs without resulting to workforce reduction? Are there ways for example in the next 30 days we can reduce our expenses without trimming headcount? I believe there are. But, in many cases it requires close procurement and finance collaboration. It requires putting in place better management strategies internally. It requires looking more closely at our payable obligations to suppliers. There are lots of things that we can do quickly, but, we have to think of creative ways of getting savings quickly without just trimming headcount. What do you think? What are the best techniques and approaches to go after the opportunity?
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What others are saying
Syed Khan MCIPS.C.P.P.,C.P.M. from Procurement 2 weeks , 3 days ago
This is an interesting subject, because when it comes to savings immidately everyone looks back at pay roll which is the easiest task, but it can have negative impact both morally within the staff of procurement Department and others, same time we loose the most talented brains with experience, vendor relations which are conduits of savings. There are enormous ways of savings direct or indirectly like we reviewed our materials and associated costs and found that immidately we can have more than 8% reduction in the inbound shipment costs due to slowing of the markets our shipping and logistics Companies were willing to reduce the costs, secondly we negotiated extended 45 days payment terms this was done mutually without any arm twisting that saved us huge cost of finance and helped managed better cash flow, with deffered payments we were encouraged to take 40 Ft containers that further lowered our logistics costs in shipping, handling and customs clearance. We also focussed on sustainable procurement and reviewed and replaced all our hardward orders with 20% more energy efficient equipments. Replaced office automation equipment orders with leased /shared and pooled network this was all possible because we got the management support for these changes and specially working in partnership with finance helped change the mindset of everyone and get their support and cooperation
Sophia Haller from Procurement on 4/11/09
I’ve heard of some companies using hardball tactics and forcing suppliers to reduce costs by a certain percentage – do you know if this happens often? It seems like a quick win but would have to create bad blood too.
Fred Taylor from Finance on 30/9/09
I agree with the earlier comment, labor markets in the EU are very different than in the USA which means we have to make different choices. Often I find it is to the EU’s detriment to be so ridged but during this ‘recession’ it seemed like it afforded the European companies a longer view.
Ethan Oaks from Finance on 18/9/09
I’ve recently read that the best companies wait until the last moment to pay their invoices and often routinely are late – strategically. Holding on to cash longer is worth something apparently. Are early payment discounts a reality and how much does it save a company?
Dylan Nash from Procurement on 15/9/09
Cutting costs is desired but reducing headcount brings us to the age old question: who do we cut? I’m in favor of reducing management, but others think sales and others marketing or R&D – who do we cut?
Michael Turner from Finance on 7/9/09
Market indicators seem to show the upswing and at this point, we would have made any cuts months ago. Now we are looking to see how we are placed competitively and seeing that those who cut manpower aggressively are struggling.
Robert Green from Finance on 1/9/09
In Europe it often isn’t practical to reduce headcount so quickly due to legal reasons. It also is short sighted and doesn’t allow for the upswing in the market. We’re looking to curtail travel and entertainment expenses and any employee related benefits (memberships etc.) that we can. Where else could we look?
John Coman from Procurement on 27/8/09
Dr Robert Fieten counted last year that doing a 3% reduction in purchasing cost has the sames effect as having to increase your turnover by 52% in trade industry. So focus on how the purchasing is done.
Rick Plumley from Procurement on 26/8/09
When we’re talking immediate control over short-term spend, better controls into purchasing would definitely help. Of course, if you’ve got the right systems in place, you can simply work on the behavioural patterns of your workforce – only dealing with certain suppliers, directing employees to cheaper options, cutting spending entirely in some categories (without CFO or VP approval), etc.
Richard Atkins from Finance on 25/8/09
We could renegotiate costs and contracts – if you pay well and on time, use this as a negotiation tool.
Emily Robinson from Procurement on 24/8/09
In an emergency situation, we can push out payment. But I don’t like going back to my suppliers and asking for additional savings after making their cash flow miserable.
Paul Sharp from Finance on 24/8/09
Cut back on non-essential expenditure and force holidays. Try to have virtual meetings instead of incurring travel costs.
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