27 Uplifting Cost Reduction Strategies You Should Try

For supply chain, procurement, logistics, and operations professionals one of the top goals is to reduce cost while keeping other metrics such as on-time delivery, quality, productivity and safety at the highest possible level. Whilst the focus is there, it’s hard to find many cost reduction strategies.

So, what should you do?

While most business concentrate on increasing sales, reducing outlays, it is equally important to focus on cost reduction strategies when trying to attain profitability.

As one of my colleagues put it

“Volume is Vanity, Profit is Sanity and Cash is King”

That is partialy because profit margins come in several flavors and are often accessible in exceedingly multifaceted ways. While you cannot force your clients to spend more or pay more, you can control cost in most circumstances. The trick is knowing which cost reduction strategies to apply and by how much. Here is a look at some easy cost reduction strategies to expand your brand’s net profit margin by reducing common expenditures, without obstructing your activities, goals, or even slowing down your business’s ability to grow. Some are applicable to manufacturing business, but most of them could apply to any business.

1.   Always Remember Everything Is Negotiable

Except for when it is plainly spelled out in a contract, every fee is negotiable. Entrepreneurs have a habit of to look out for each other, and merely saying that you own a business is often enough to get a discount. In some situations, there is a lively quid pro quo at work.

Most importantly this applies to Direct and Indirect Buyers who are trained to negotiate and expected to drive cost reduction pipeline 3 -7% a year in year out in their respective commodities & categories.

2.   Deploy Lean & Six Sigma Tools & Philosophies

Over decades both Lean and Six Sigma has created savings in millions when deployed in a structured fashion with right leadership and support structure. Whilst I agree Lean can produce product savings in both material and labor cost, this should not be the prime aim. The main target should be to improve flow.

Similarly, there is clear expectation from Six Sigma projects to deliver big savings by reduction variation, they could be hard saving (can be measured on the bottom line) or soft saving. There are huge amounts of material available on sources like isixsigma which you can refer for more details.

3.   Buying (Gently) Used Products

There is no place in your business bylaws where it is stated that you must purchase only glittery new equipment. So why not purchase gently used Products, when it makes sense? Depending on what your business does, you can find gently used Products on Assembly equipment, Glassware and cutlery, Furniture, Office technology, Personal technology, Vehicles, and Storage equipment.

4.   Transportation & Logistics Savings

This includes the saving like freight, productivity improvement in warehouse, changes in warehouse structure, consolidation of warehouse or outsourcing the non-core activities to 3PL or 4PL who are better equipped to manage your warehouse or road transportation.

Whilst there’s strong temptation to have your own warehouse and fleet, it is very expensive to run them and most businesses use these assets inefficiently. This is massive topic to cover, therefore, I will probably write a separate blog on possible strategies to drive transportation and logistics savings.

5.   Evaluating Worker Perks and Fringe Welfares on Merits

In several industries, talent struggle is aggressive. On top of juicy packages and substantial time-off allowances, many businesses offer marvelous perks and fringe assistances in a constant arms race to entice ultra-qualified staffs. However, with time, they can disturb productivity. To enhance self-esteem and shape amity, substitute luxurious perks for cheaper, social ones like team building events, employee recognition program or Amazon vouchers!

6.   Freelancers and Contract Labor for Minor Works

Freelancers and autonomous contractors are easier to hire and economical to keep than traditional staffs. You are not expected to offer health insurance welfares, pre-tax retirement accounts, or other pricey assistances. You just need to pay them for completed work. These cost reduction strategies serve better during one-off projects and non-core activities.

7.   Inspire Telecommuting

For thousands of business owners, telecommuting has marvelous cost-cutting potential. Regrettably, that potential is still mostly untapped. With this cost reduction strategies, business owners can be directly impacted by reduced utility costs through lesser electricity/water usage, reduced travel costs for employees, and reduced time lost to commuting.

8.   Trade Management Saving

For most manufacturing business the importing and exporting of goods is very common, and for companies who are either importing and exporting out of EU, the trade management bill is heavy.

Ask around and you will be surprised to know very few people know the benefits and details of GSP, i.e. Generalised System of Preferences (GSP) system under which the EU - and other developed countries - offer developing countries lower tariffs on their exports into the EU. In other words, you can save import duty if your goods qualify?

Similarly defining the country of origin correctly is very important in trade management. Inadequate processes can cost you lot of money!

9.   Avoid Procrastination and Inspire Effective Time Management

Time is money, and this simply implies wasted time is wasted money. Every minute spent procrastinating is a minute that is not being spent on productive work. If chronic procrastination is becoming an issue, figure out why and take suitable steps to address it. Procrastination is not a catch-all offender for office efficiency woes. Some are better at a time than others. The use of Project management apps and inter-organizational messaging tools are part of this cost reduction strategy which can go a long way toward streamlining functions necessary to your brand’s goals.

Continue reading the full blog here.