Cost saving initiatives need to be shaped and implemented by all departments in the organization; the entire process of planning, monitoring and measuring needs the support of all. Everyone from the top to the bottom must be actively involved, and work towards the new goals set. Expense reports are obviously the most logical place to start. These should be over a relatively long period of time in order to remove any seasonal variations. It is also important to stay focused on the key areas that account for the major 80% of costs.

Many organizations believe in myths like an “informal program for cost reduction is fine”; or even that reducing costs have a negative impact on quality. Nothing could be further from the truth. The most efficient cost reduction programs are those that very formal / specific and have clear objectives & accountabilities attached to it.

Companies that have been successful in cost reduction realised that it’s not enough to just reduce expenses to remain competitive; rather it takes innovative measures to emerge as leaders. This is why the role of knowledge advisory groups is so important. They help provide a much needed innovative & structured program, designed through practice-proven tools and strategies from specialists.

For example, it is easy to see why so many companies choose to downsize their workforce so that employee costs, which often account for more than 40% of a company’s operating budget, can drastically reduce overall expenses. But how many have actually considered outsourcing non-core functions, like outsourcing the entire supply chain. Many auto & chemical companies around the world have outsourced their logistics, and are saving considerable amounts of money.
Even in the domestic Indian market (sans the effect of globalization) there is a tremendous need for companies to improve their supply chain processes due to:

• Well informed, powerful customers: The level of customer satisfaction is often driven by the supply chain. Customer expectations today stand at very high levels where responsive, demand-driven ones meet the desired service levels. For this supply chains need to be well integrated & at the same time help maintain low costs and high margins.
• Shorter product lifecycles: Product lifecycles are getting shorter and shorter mainly led by technological advances. Take for example the tremendous impact that the invention of a tiny microchip had on so many products across industries.

This means that companies need to continuously introduce new products to stay in business. Unless one has a well co-ordinated and collaborative supply chain, the entire new product introduction will be a failure- right from the development costs to the time-taken-to-market.

• Reaching the rural customer: More than 70% of India’s population lives in its villages. This “bottom of the pyramid” represents a huge untapped market potential. Companies are striving on new ways to reach out to this huge market. This requires huge investment in infrastructure development, Information Technology and the local people. It requires a robust supply chain to reach out to these markets and achieve the desired ROI.