Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

Three deadly sins of cost savings

By Vantage Agora Subscribe to RSS | June 6th 2012 | Views:
loading
 
  



Over the last weekend some of us in VA Consulting team were having a discussion about cost cuttings. We quickly came to the realization that we have seen literally type of cost savings known and started listing the good and bad. The result of that list is this article. We are confident that you can find this useful in your cost savings efforts:

Mistake 1: ROI and not just cost: In most cases we have seen people look at only the cost side of an initiative (Most of the time it is not their fault and it is because they are incentivized to behave that way by upper management) leading to some great initiatives being cut off. For example, a company shut down operations in a city because they figured it will save them money. They did not even do a cost benefit analysis to see how much sales this center would cater. Leading to catastrophic downward spiraling of the company fortunes. The irony is that upper management took fat bonuses as they met their KRA for cost savings the previous year!

Learning: Always look at the Return on Investment (ROI) and NOT just on cost.

Mistake 2: Move highly skilled operational domain knowledge workers into customer facing roles: Following up on Mistake 1 most upper management look at reducing people as cost savings. Then they turn around and hire people with different skill to grow the business in the next quarter. Yes, there are times when people have to be let go but more often than not the cost of letting go and rehiring is more than retraining most of the people than letting them go. For example if you need 10 sales people instead of 20 operations people because you have moved operations offshore, go ahead and retrain the people in operations than trying to hire new people. You will be surprised how many good people you will get out of this effort. Instead, if you look at how much you have saved by just the offshoring activity and fire

all the people in your internal operations it will end of costing you more.

Learning: Make sure that you look the complete game plan over a period of at least six months before making cost cuts. You might end up losing your best people if you are not careful and not have anyone to grow the company.

Mistake 3: Look for hidden costs in calculating cost and cost savings: Calculating cost can be a tricky issue. Most companies calculate cost by saying that they are more efficient than anyone else in the industry and that their internal costs are the lowest in the industry. Literally every

company that we have worked with and worked at has claimed this. The reality is that they all fit into the normal curve and have the same cost structure as the industry. The biggest reason why most people think that their organization internal cost is the lowest is because they don't consider some of the hidden cost of operations. The commonly excluded costs are:

1. Management overhead to manage the initiatives

2. Hiring and firing costs

3. Infrastructure cost (Especially IT and communication)

4. Learning

5. Operation efficiency improvements (Huge latent cost here)

6. Sales support costs

Learning: Look at the industry averages and your internal costs with items listed added to your costs.

What we have provided to you is information and learning in working with several customers like you. While all of want to think of ourselves to be special the fundamentals of business are the same for everyone. They are very simple. If you look at the just the short run or only part of the picture it will come back and hurt you. If you need more information on how to improve the efficiency of your organization, please feel free to contact us.

Vantage Agora - About Author:
Harsha Chaturvedi (COO and Founder, Vantage Agora)

As a founder of Vantage Agora, Harsha has been instrumental in the growth of the company since its inception.Harsha has over 20+ years of experience in consulting, running and helping companies and their supply chains worldwide. His work with many companies, has made him a "turnaround expert". Harsha has four worldwide patents in the area of supply chain management.

He holds an MBA from Southern Methodist University (SMD), Dallas, a masters in Computer Science from Louisiana State University (LSU) Baton Rogue, and a bachelors in Engineering from Bangalore University.
http://www.vantageagora.com/contactus

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/business-articles/three-deadly-sins-of-cost-savings.htm

Related Business Articles Subscribe to RSS

Three deadly sins of cost savings
Published by Vantage Agora on June 6th 2012 | Business
...
 
IMF cutting global growth forecast- Lagarde
Published by Bettina Azaria on July 18th 2012 | Business
Christine Lagarde, the chief of the International Monetary Fund that is IMF has reported that when ...
 
Use CNC Gear cutting machines of Higher Profits
Published by MatthewNicholson on March 21st 2012 | Business
Our Company has created a name for itself in the field of machine and machine parts designing. We ar...
 
Precision Waterjet can provide you with precise abrasive waterjet cutting
Published by Mary Porter on June 20th 2012 | Business
The process of abrasive waterjet cutting is based on the principle that if you were to pressurize wa...
 
Understanding Water Jets cutting systems
Published by Ron Fairchild on August 14th 2012 | Business
Information on how Cutting Edge Water Jet Service can cut material including composite, laminates, p...
 
Loss-cutting for Commercial Printers
Published by Kate Manheaven on January 22nd 2012 | Business
When you are able to cut down all of the unnecessary and unwanted losses, you would no longer have a...
 
Low cost International freight quotes for beneficial shipping
Published by Richardo Haris on March 17th 2012 | Business
Getting accurate International freight quotes is not that easy in this competitive world. This conti...
 
Important points for cutting blade
Published by Paular Change on June 1st 2012 | Business
Take proper care when you are using the equipment as the rotary cutting blade is too sharp. It is es...
 
Water cutting and kitchen utensils
Published by Ajax William on March 16th 2012 | Business
Homes are not, the only place, where kitchen utensils are used. They can be needed in resorts, resta...
 
Low cost Trendy Cabaret Franck Muller Casablanca Replica: an Economical Alternative
Published by Hanliu1003@hotmail.com on December 19th 2011 | Business
Watches are inseparable parts of our life. As people’s living standard increasing, IWC Replica Wat...
 
Slash the cost of pricey BMW Spare Parts
Published by James Blee on June 16th 2012 | Business
Been paying full price for BMW spare parts through your local main dealership? Do you feel your hea...
 
Good points and Low-cost Ball Valves for Industrial use Compared to other Valves
Published by Docoii Seo on May 11th 2012 | Business
Ball valves with Belimo actuators really are exceptionally great at manage, and totally make use of ...
 
Using Refurbished device and Telecom Equipment for business houses saves cost
Published by James Blee on May 28th 2012 | Business
The idea of cementing business foot in this modern era is possible through invention of ideas in sav...
 
A company’s repute and the water jet cutting services
Published by Ajax William on March 16th 2012 | Business
If the reputation of a company in an industry is great, then it will be recognized, by the customers...
 
India Property – Tips on low cost techniques for maintaining your commercial property
Published by John Smith on March 7th 2012 | Business
As your India property ages, it will definitely cost you more to maintain the building particularly ...
 
Low-cost Replica HUBLOT Watches: an Economical Choice
Published by Water123 on November 29th 2011 | Business
A fashion type of Hublot Replica Watches can add much charm to the otherwise plain dressing style of...
 
Unitedshades.Com coupons and codes at any cost are productive to the consumers
Published by Manohar Sai on January 9th 2012 | Business
Some trustworthy websites that offer listings and sharing are Unitedshades.Com ...
 
No cost purposes for ones Apple mackintosh solutions
Published by John Culvers on July 14th 2012 | Business
While using have to have to get ideal purposes for ones mp3 player, it might truly always be a good ...
 
Cut the cost of motoring - an LPG Installer London has the solution
Published by Mary Porter on June 20th 2012 | Business
This green type of fuel is on sale at over 1300 petrol sites in the UK and once you’ve had your ve...
 
Contractor Expenses – effective cost management
Published by Crowin Smith on April 3rd 2012 | Business
Managing a business is a hard task when the world economy is not creating the right condition that f...