Sunday, August 3, 2008

The Right Way and the Wrong Way to Cut Costs

The Business Finance Magazine published last month, an article called The Right Way and the Wrong Way to Cut Costs, written by John Cummings. He is commenting the Deloitte's report: In Fighting Shape? 2008 Survey of Cost-Improvement Trends in the Fortune 500

The article defines how the companies are treating the cost-management initiatives: "The good news is that companies these days treat cost containment as a discipline and an ongoing process rather than reactively. The not-so-good news is that they tend to focus on minor, low-yield initiatives and on squeezing expense out of their processes."

The report examines the latest trends in cost improvement, and offers practical and time-tested insights to help companies as they choose an approach for the future.

Deloitte studied cost-management initiatives at 70 of the Fortune 500 and found that about two-thirds of executives at those organizations expect their current efforts to provide only single-digit savings. The other third are aiming at bigger savings through what Deloitte describes as "transformational" improvements to their cost structure.

The Deloitte's report offers five tips for doing cost reduction right:
- Start with the obvious
- Take an enterprise view
- Protect strategic investments
- Balance short- and long-term improvements
- Choose the right business model

This is an interesting report about an increasingly important subject to the companies nowadays.

No comments: