A2.3 Optimise100 - Cost Reduction
The fastest way to improve your profit is to reduce the costs in your business!
However, we need to bear in mind that this is a very limited step. If you save costs to the ultimate degree, you no longer have an operating business! Clearly there is some point below which cost cutting can damage the business rather than improve profitability.
Nevertheless, it is very often the first step undertaken by businesses and very often is undertaken without much discrimination. We often see overly simplistic cost reduction exercises where, for example, 10% of the staff are made redundant across the board without giving thought to necessary skill sets and the products and locations that we want to maintain.
This Yellow Belt article illustrates a number of cost centres that you can consider overhauling on your road to Streamlining Your Existing Operation in 100 Days.