Cost Reduction & Control in Manufacturing Sector
Cost Reduction
There are right cost reduction techniques and there are wrong ones. Using the right strategies will result in a more efficient company spending. Using the wrong techniques will create a reduction of expenses required to maintain product quality and company value. It is a fine line sometimes, but a systematic approach can help managers avoid making serious mistakes in the rush to cut expenses.
Cost management strategies should be utilized as components of a larger objective to maintain maximum profitability. As such, cutting expenses will be just one part of a plan that focuses also on maximizing revenue.
Effective techniques will begin with the setting of goals and objectives. There can be many reasons why a company might need to cut costs. * To create additional cash reserves * To reduce price of product or service * To bring expenses in line with revenues * To eliminate unnecessary expenses or wasteful spending * To increase company value * To increase competitive advantage * To move costs between departments
Identifying the goal of the expense reduction exercise will assist with implementation of an effective plan. In other words, if you don't know why you are cutting costs, how are you going to know where to cut costs?
The purpose of expense reduction is to help the company towards long term survival. Purposes of expense reduction include: * Create cash for reinvest in research and development * Reduce manufacturing costs to stay competitive * Reduce costs as a non-profit so able to serve more people * Lower costs of service in order to provide additional services * To become more efficient * To prevent employee lay-offs * To prevent reduction in employee benefits
Cost reduction techniques should also be evaluated in terms of impact on the organization. Prioritizing the goals of the cost cutting program will insure that the strategies are implemented appropriately.
There are many
There are right cost reduction techniques and there are wrong ones. Using the right strategies will result in a more efficient company spending. Using the wrong techniques will create a reduction of expenses required to maintain product quality and company value. It is a fine line sometimes, but a systematic approach can help managers avoid making serious mistakes in the rush to cut expenses.
Cost management strategies should be utilized as components of a larger objective to maintain maximum profitability. As such, cutting expenses will be just one part of a plan that focuses also on maximizing revenue.
Effective techniques will begin with the setting of goals and objectives. There can be many reasons why a company might need to cut costs. * To create additional cash reserves * To reduce price of product or service * To bring expenses in line with revenues * To eliminate unnecessary expenses or wasteful spending * To increase company value * To increase competitive advantage * To move costs between departments
Identifying the goal of the expense reduction exercise will assist with implementation of an effective plan. In other words, if you don't know why you are cutting costs, how are you going to know where to cut costs?
The purpose of expense reduction is to help the company towards long term survival. Purposes of expense reduction include: * Create cash for reinvest in research and development * Reduce manufacturing costs to stay competitive * Reduce costs as a non-profit so able to serve more people * Lower costs of service in order to provide additional services * To become more efficient * To prevent employee lay-offs * To prevent reduction in employee benefits
Cost reduction techniques should also be evaluated in terms of impact on the organization. Prioritizing the goals of the cost cutting program will insure that the strategies are implemented appropriately.
There are many