Sometimes Chinese culture confuses us ……………
It wants to be excessively practical and sacrifices customer comfort areas, as an alternative to refocusing, innovating the services it provides.
But if this anecdote wakes us up and places us in the reality that, when we evolve, things do NOT have to be done the same, that in times of change a change in our forms is also necessary…,…………… we will have already taken a step ……
In the area of cost reduction / elimination, in the innovation of approaches,…..You should not hurry ………………….. you must RUN ………………
how-to-eliminate-costs-costs-in-the-company-1(RESTRUCTURE - REDUCE - ELIMINATE COSTS)
We are not talking about "restructuring", nor about reducing, we are talking directly about eliminating costs.
Eliminate costs not related to the necessary dwarfing of the company, nor its impoverishment, eliminate costs not related to the client and our creation of value.
We like to talk about methodizing costs
necessary and related to our core business and the rest REMOVE THEM…..
SOME INITIAL CONCEPTS
COSTS can be defined as those whose consumption we need to manage our business.
A first division of costs are: fixed, variable and mixed.
“……… in times of crisis or changes in the environment, it is that sometimes we forget the drastic need for rethinking or even eliminating costs ……”
Variables being preferred for adaptability to business volumes, a capacity that the former do not have
Another division according to its departmental nature: Administration Costs, Sales Costs, Purchase Costs, Production Costs, etc.
The classification derived from its relationship with the activity, can be Direct and Indirect Costs
The importance of ALWAYS of costs, when we talk about it and its management, in times of crisis or changes in the environment, is that sometimes we forget the drastic need for its elimination as far as feasible, remembering the saying
“………… we should not use bandages for bleeding ……………”
That is, more than ever, adapt to the moment, and without damaging relations with the market and customers, manage to ELIMINATE costs. (A friend of mine says "now it is especially necessary to do MORE WITH LESS…")
I like the theory of the 5 “P”, ……………. it helps me to have the vision to be able to establish an action plan and eliminate costs
STOP (we don't always take off from day to day)
THINK (measuring concepts and identifying decisive factors) ο CMI (to measure and identify)
ο RATIOS (example: how personnel expenses have evolved in relation to sales variation)
ο BENCHMARKING (to compare ourselves with our competitors)
ASK the team, ideas, Brainstorming, etc, ο If in the last 6 months (for example), your most direct collaborators have not offered you innovative ideas about cost elimination, or anything else, that is, they think that nothing has changed, and that things should be managed the same as before …… ”MAKE IT SEE” …… because you are to blame.
As they always say “…..what is not measured does not exist….”, And if I do not measure it I cannot specify effective measurable actions in turn ……
TO PLAN
ο Strategic plan when we make a trip, and we have not planned it well, going for example with excess luggage, in addition to reducing the possibilities of space for other things, we have a higher cost of gasoline, perhaps more stress, possible greater fatigue and what is more important: "not enjoy your own trip"
TAKE ACTION
ο Manage the team's ability to accept CHANGE ο Eliminate possible and IMPOSSIBLE costs !!!!!
REDUCE COSTS AND FAVOR QUALITY = perhaps good cost management and not dwarf the company.
SOME BRUTAL CONCEPTS OF COST MANAGEMENT
ADMINISTRATION
Eliminate ASVAS (activities without added value), for example "locate and photocopy documents", for example having to pick up the telephone receiver to attend to it, for example walking to the next office to indicate something that we can do by computer means, for example send normal mail instead of email, or worse, receive it, and have to open envelopes, handle documents and finally the odious thing of filing it, photocopying it….etc.etc.
“Zero” papers (desirable, but it will be more, when you check and add the costs of paper, toner, more commuting to the printers, plus the opportunity cost of what is being done to do this)
Document management
Delete FAX, by email (forceful) Negotiate using the "crisis"
Example: Managing and negotiating the lowering of our rents, or the services of some of our supplies in general, given the existing crisis and "already known to all"
Zero budget
Annual “rethinking” method of each and every expense
It is about eliminating costs that do not affect the main activity, or at least directly or significantly.
It does not take into account the year-on-year percentage change, but rather the absolute euros that they mean, and the necessary amount of their spending to achieve the desired business volumes and profitability. Cash management
As the song "All you need is Cash" would say… (and all that you need is money), and within it its optimized management, allows you to find out a whole world of cost savings.
Analyzing "idle money" and its adequate profitability.
Analyzing and comparing the different financial entities that serve us
Trying to pass on the financing costs to the client
Actively managing to snatch discounts from the supplier for the perhaps reduction of our payment term
Reducing financial costs, working on any of the variables volume financed, term and need to do it (if we reduce stocks, it will not be necessary to finance them ……)
Reduce the average payment period and increase the average payment term (it is already known that paying is cowardly ……)
PURCHASES
Study the creation of the Purchasing Department, isolating the ECONOMIC purchase from the technical purchase
Review supplier contracts
Bringing volumes of the same concepts together to favor negotiation
Example: We have dispersed insurance in various companies, both for cars, as for local, life, etc. Well, bring them together to request a GLOBAL quote through a specialist, which allows better coverage and lower costs
INTELLECTUAL CAPITAL
Restructure the way of interacting in the organization chart, facilitating the capacity for action and decisions.
Staff training and especially predispose to it
Simplify circuits and processes, and as a consequence, have fewer errors and not need special knowledge or skills in our people
Outsource, outsource convenient areas
Substitute, as far as possible, fixed remuneration for variables.
Study the possibility of paying wages with alternative formulas, such as wages in kind, which allow lower costs for the company, as well as possible higher net income for the employee.
CUSTOMERS
Go for 80% of customers (rule 80-20)
Eliminate clients, unprofitable or with excessive risk premiums
Customer segmentation
Follow a client selection policy, with differences in the treatment of rates, basically in line with the assigned business volumes and the existing risk premiums.
Eliminate unprofitable customers and products
What does not have contact with the client: EXTERNALIZE
Eliminate “late payment costs”
Delinquency not only has direct costs for the loss suffered, when a client does not pay us, but necessarily while that situation arises we incur costs that directly and indirectly cause us costs and time occupation, directly measurable in euros.
When not, it also affects our creditworthiness with financial institutions,… that is, when we have unpaid, we have less and less possibilities of financing ourselves, etc.
PRODUCTION
In production, actively manage:
Tendency to transform FIXED Expenses into Variables
Stock reduction
Lean Technique (Toyota)
ABC System, (Activity based Costing)
Eliminate bottlenecks in production
6 Sigma
Implement accounting analytics
By orders, and with summation by clients, by areas, by departments, etc.
ELIMINATE COSTS BY OUTSOURCING
The selection of departments to outsource can benefit us in:
- Focus our attention on what is important in our business Transform fixed costs into variables Lighten our boats, weigh and give them more spirit and easier navigation and
"Waist" to adapt to the changing market
Reduce costs in absolute euros
Perhaps there is talk of “outsourcing”, but I like to “outsource”. They tell us that 77% of Spanish companies have something outsourced. What is usually outsourced?
Maintenance, Logistics, Informatics, Telecommunications, Administrative management, Management
Financial, Human Resources Management, etc.
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