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Thursday, 13 November 2008

Painless Cost-cutting

The news is full of cost-cutting programmes, usually involving large-scale job losses. Only today, BT announced a further 10,000 job losses by March next year. In addition, every company I talk to is undergoing some form of cost-cutting exercise at the moment and it is easy to see these as involving nothing but pain.

It is important to note though that a significant level of cost-cutting is possible without any pain and without cutting your workforce or capacity to take advantage of opportunities. Those businesses that can remain at full strength through the recession are likely to profit from cut-backs at their competitors.

I am talking about reducing what you pay for your overheads rather than what you are paying for. Most businesses have a decent grip on what they pay for raw materials but invariably significant savings can be made across their overheads by switching to more competitive suppliers.

There are a number of reasons why existing suppliers might not be the most competitive, sometimes it is just complacency.

Also, many of these areas do not get looked at as often because individually they may not appear to represent a large percentage of total costs, however it is important to remember that these savings are not harming the company's ability to operate.

Would it be better to save £20,000 p.a. by laying off an additional employee or changing stationery suppliers?

Also, some of these areas are a bigger spend than people realise. On average, spend on printed materials accounts for around 1% of sales turnover. A saving of 20% on this spend has the same effect on the bottom line as a 1% increase in sales (assuming a generous profit margin of 20%).

At FC Procurement we provide a free service to our clients to help effect these changes with the minimum of effort on the client's part. We cover a wide range of supply areas, that is growing all of the time.

If you are a company based in the UK who is looking to save money without the pain, check us out.

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