It is no use improving your earnings and having excellent sales strategies if your costs are also increasing. In times of economic crisis, decreasing business spending becomes even more necessary and can become vital for companies to stay alive and active in the marketplace, but if done wrong can lead to desperate and not always effective measures. Therefore, the manager must be aware of tips and new technologies that may contribute in this regard.
Do you know what costs you could cut or reduce?
What expenses can be better managed?
How does it work?
So read on for tips on how to reduce your business operating costs.
Review and analyze suppliers, it is critical to check if your current partner is delivering what your business demands. This requires monitoring of supplier-related key performance indicators (KPIs). You need to evaluate what you value in this partner and what they are offering. For this, it is possible to check metrics such as the average input delivery time and the quality level of the raw materials. It’s also important to understand how your partner’s process works so that you have the foundation to look for improvements that bring gains to both of you.
This involves knowledge of the demands, the productive capacity, the commercial service offered by him to other customers. This will save you money by hiring a supplier that sells cheaper inputs or by cutting services you don’t use with your current partner.
Set cost cutting goals. If you don’t measure and control your expenses, you’ll never be able to improve your operation and save money. For this, it is possible to set targets for spending cuts that are consistent with reality and that are challenging but not unattainable. Therefore, it is indicated to analyze the industry’s performance in past periods to have references. For example, you can check your shipping cost and area performance in previous years to try to reduce transportation costs or at least keep them commensurate with the needs of your current operation, even if it has grown. One tip for optimizing your cost targeting is to use the Pareto Principle, which indicates that 80 of results come from 20 of causes. Ideally, this goal setting should be done at the time the annual budget is set, and a monthly follow-up is also required.
Perform frequent maintenance on your materials. Of course, the fewer outages you have in the industry, the higher will be your productivity and the lower your corrective maintenance expenses. It is necessary to invest in monitoring the condition of the equipment, in the replacement of parts and proper lubrication, aiming to maximize the useful life and unexpected downtime of machinery and equipment.
Especially in industries where machinery has high values to be purchased.
Make continuous process improvements to link and make visible process KPIs, allowing operations to be monitored to keep costs under control at all times. For this, the PDCA method – Plan, Do, Check, Act – is the most used because it aims at continuous optimization of processes within the company. There are four phases that allow you to create habits in the organization, promoting improvements and greater control of activities.
Automating business and processes, allowing records to make processes more visible, you will be able to understand your business much more and lift your employees to activities that require more creativity and human talent by automating operations that are repetitive and monotonous. That is, productivity will increase; with automating processes, there will be fewer human errors and more accurate operations, reducing overall business costs.
Renew equipment and machinery. As much as you maximize equipment life, they still have a maturity from which your operation becomes very costly and unproductive. In addition, new technologies may represent better product quality, faster production, reduced use of inputs and other advantages depending on innovations. Reducing operating costs involves a continuous and structured pursuit in which all leaders and followers must participate. It is necessary to build an organizational culture aimed at maximizing the economy and eliminating waste, as this is the only way to obtain positive results. After all, there is no use applying the above tips if employees do not cooperate with them, continuing to waste resources.
Author: Gabriel Sampaio
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