More on Cost Cutting…

Mike Arenth at Ariba, Inc wrote on 13 January

Faced with tightening finances, deflation and increased supply chain risk, business ranging from industrial manufacturing to high technology must find ways to ensure their financial health and, ultimately, their survival.

As the global financial crisis continues, executives are being asked what their bailout strategy is.  And for an increasing number, the answer is spend management – the discipline of controlling and optimizing the yield of every penny that you spend. 

Our thoughts…

Obviously, it makes sense to find ways to ensure your company’s financial health and, ultimately, its survival. 

The answer is ‘spend management’?  Isn’t that just fancy marketing jargon for cost cutting?

He does mention an interesting cost containment idea – Purchase contract management software to ensure that agreements [contracts] are negotiated and finalized according to company policy and then implemented and complied with quickly.

We see this as the Quote-to-Order process.  This is a very key process for most companies and we don’t know of any company using software to manage this process.  Some reasons manage contracts include:  negotiated agreement is recorded; the price quoted has been approved and you will make a profit on the deal; the details of the order have been approved; the order is entered; the customer has been involved in the process; etc.

I have said this before and it is still true…

No matter how bad the economy may seem now, there is light at the end of the tunnel – recessions and economic slowdowns do not last forever.  Good times will return.  Be prepared to hit the ground running when they do by taking action now.

The real question is – Are you prepared to hit the ground running?

Your Thoughts…

See previous blog for the background to this blog...

A response from Terry Schurter, Director of International Process and Performance Institute…

The opportunity here is far greater than even your insightful (but modest) article presents...
It all starts with one basic premise. Process improvement, when done right, Reduces Costs, Enhances Service (to the customer) and these two things combine to Increase Revenues.
Let's look at that again. Regardless of what our motivation is to improve our business processes, when we do so by eliminating the very causes of work (the right way to improve process), we eliminate internal hand-offs, non value-add work, and extraneous customer touch points that are such a huge source of customer dissatisfaction.

That means it costs less for us to do the work we normally do and there are fewer places for deviations to occur that negatively affect our customers.

So if we can decrease our costs and increase our customer satisfaction level by doing so - why wouldn't we do that? Why wouldn't we do that every place we can, regardless of economic conditions? Why wouldn't we do that when our competitors aren't doing it, and give ourselves significant competitive differentiation?

What the economic conditions should be telling us is that what we are investing in now is not what we should be investing in (its why we are here), that keeping our customers is more important now than ever, and that taking steps to improve our customers' satisfaction level while reducing our costs of doing business (at the same time, with the same actions/investment) is the one thing we can't afford not to do.

Or we can crush budgets, make everyone miserable with restrictive policies, trigger widespread frustration by dumping the burden on employees already over-worked, and moan and groan about the wicked trick fate has played on us.

Not a hard decision from where I'm sitting...

Our Thoughts…

I think that this response takes my ‘Ideas’ for cost cutting from last week to its logical conclusion.

I think this says it all and says it simply – ‘Process improvement, when done right, Reduces Costs, Enhances Service (to the customer) and these two things combine to Increase Revenues’.

Your Thoughts…

I would really like to see your thoughts on this topic.