Manage your costs

Although the economic downturn has forced companies to re-examine thier cost base, some companies have started to look at this rather late.  However, many companies that have reduced their costs have failed to to reduce their cost base in  a long-term sustainable fashion, whilst successfully maximising profitability.

Companies should focus on enhancing operational perfomance. Go for targeted rather than across the board cuts. Extract better value. Reduce unecesseary complexity. Look at whether you business model needs to change.

To be in the right place for when the  economy turns, the emphasis should be on:

* improving business performance and driving profits through improving efficiency and eliminating waste;
* managing people costs.
* improving planning and execution;
* simplifying and improving business processes
* improving the overall cost control environment and creating a cost culture; and

What questions should you ask?

Cost of supply

* Is  your business making and buying the right things?
* Am I putting its skills and competitive advantages in the right place?
* Is the company eliminating waste?
* Are the operations completely aligned to the end consumer?
* Can we employ smarter procurement techniques?

Value creation

* Does your management team understand where value is being created?
* Which products make money and which products loose money?
* What profits are your activities generating and where are you wasting money?

Business structures

* Is your company organised to service your customers in the lowest cost way?
* How much do you spend on business support? Is this appropriate?
* How much overhead creates value and how much is just overhead?

Controlling your people costs

* Are your people doing to maximise profit and minimise waste?
* Are you doing all you can to reduce your people-related costs such as holiday, pensions, share schemes, sickness pay, benefits and car schemes?
* Are you doing tasks that could be done more cheaply elsehere (outsourcing activities)?

Cost culture

* Long term, how do you keep out cost creep?
* Are your business processes and practices aligned to keep costs down?

So what is your business doing to keep down costs?

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