Unit 7 P4 Business
Suppliers and the ordering process
The ordering process can sometimes be a source of unnecessary costs. This might happen as OBS deals with too many suppliers and there is no clear ordering policy or guidelines as ordering is not centralised. Thus there are insufficient internal controls against mistakes and/or fraud. Reducing the number of suppliers that OBS deal with can often result in savings, especially if it gives you the opportunity to improve relationships with the remaining suppliers and negotiate lower prices and better payment terms.
Reducing labour costs
For OBS, labour is one the biggest cost centre. Thus it is important to avoid cuts that might leave the company without key human resources or at a competitive disadvantage. However
it equally important to avoid measures that undermine the morale of the remaining workforce.
OBS can consider some areas where savings might be made without staff reductions are such as flexible working, teleworking, especially when combined with cloud computing, smart recruiting and improving employee retention
Longer term strategic cost reduction approach
Create a culture of cost optimisation
OBS should regularly review updated strategic cost reduction priorities in the same way as that they assesses the relevance of its strategy and the opportunities ahead.
Priorities include enablers for periodic review and instilling continuous improvement and a culture of awareness in the business. OBS should reward and give incentives to staff to continuously look for improvement opportunities.
Aim High: Be bold, be brave and be creative
OBS should set the bar high. They should not just adopt the simple cost reduction approach.
Being bold means that OBS should be able to withdraw from markets so that resources can be better focused thus cutting back redundant parts of the organization so it can thrive.
Being brave means cutting the costs that have seemed too difficult to tackle, such as property, structural inefficiency.
Being creative means looking beyond what’s always been done, and asking why and what are the alternatives. Examples include the opportunities opening up in the market like the new technologies such as Li-fi and 5G. Crucially, it also includes real insights into what customers value and are prepared to pay for.
The ordering process can sometimes be a source of unnecessary costs. This might happen as OBS deals with too many suppliers and there is no clear ordering policy or guidelines as ordering is not centralised. Thus there are insufficient internal controls against mistakes and/or fraud. Reducing the number of suppliers that OBS deal with can often result in savings, especially if it gives you the opportunity to improve relationships with the remaining suppliers and negotiate lower prices and better payment terms.
Reducing labour costs
For OBS, labour is one the biggest cost centre. Thus it is important to avoid cuts that might leave the company without key human resources or at a competitive disadvantage. However
it equally important to avoid measures that undermine the morale of the remaining workforce.
OBS can consider some areas where savings might be made without staff reductions are such as flexible working, teleworking, especially when combined with cloud computing, smart recruiting and improving employee retention
Longer term strategic cost reduction approach
Create a culture of cost optimisation
OBS should regularly review updated strategic cost reduction priorities in the same way as that they assesses the relevance of its strategy and the opportunities ahead.
Priorities include enablers for periodic review and instilling continuous improvement and a culture of awareness in the business. OBS should reward and give incentives to staff to continuously look for improvement opportunities.
Aim High: Be bold, be brave and be creative
OBS should set the bar high. They should not just adopt the simple cost reduction approach.
Being bold means that OBS should be able to withdraw from markets so that resources can be better focused thus cutting back redundant parts of the organization so it can thrive.
Being brave means cutting the costs that have seemed too difficult to tackle, such as property, structural inefficiency.
Being creative means looking beyond what’s always been done, and asking why and what are the alternatives. Examples include the opportunities opening up in the market like the new technologies such as Li-fi and 5G. Crucially, it also includes real insights into what customers value and are prepared to pay for.