With the prospect of a recession looming on the horizon many companies are beginning to tighten their belts and prepare to weather out the lean years. During the last few weeks I’ve been collecting articles that offer some advice on how to cut down on your operating costs without compromising your service or your ability to start growing again once the economy picks back up.
The first article is a whitepaper from the Hackett group, along with some commentary by CIO magazine. The title of the paper, “G&A Spending Cuts Can Offset 21%-45% Of The Anticipated Decline In Pre-Tax Profit During Recession,” although rather lengthy says it all. Basically the Hackett group argues that there’s a lot more inefficiency floating around in most businesses than organizational leaders realize. They suggest looking at your organization from a process perspective and then picking out those processes that seem to offer the biggest opportunity for cost cutting. To actually cut costs, they offer a few suggestions. First, consider adopting industry best practices or standardizing your processes across the board. The threat of a poor economy may even help motivate your staff to accept changes they wouldn’t otherwise in easy years, helping you enact a cultural shift that will continue to be useful even once things turn around. Second, in departments where you can’t change to operate at better efficiencies, consider outsourcing them to someone else who’s doing the same thing but faster and cheaper.
The Hackett paper also points out that there are large cost savings to be found in general IT cuts. They suggest firms begin by reducing architectural complexity by consolidating applications, platforms, and data center operations. CIO’s commentary on the article adds that new technologies like virtualization can play a huge part in this consolidation process.
The second piece also comes from CIO magazine, and focuses on the rise of complex hosting. Complex hosting essentially a way for companies to outsource their entire data center. The CIO article focuses on how this can benefit companies growing to quickly for their own IT infrastructure can keep up, but complex hosting offers cost savings for more stable companies as well. Professional data centers are almost always more reliable than anything a small business can afford and benefit from economies of scale. The potential for savings here is obviously huge. Organizations can make a serious dent in equipment costs through this sort of outsourcing. And the additional reliability will no doubt impact tha bottom line by preventing downtime
And in a continuing trend, the final piece is also from CIO, though this time from one of their community blogs. In it Vivek Sehgal explains the practice of cross docking. Essentially cross docking is a way for organizations who ship and store things to cut down on costs by shipping items the moment they arrive at the facility. This practice cuts out both the cost of storage and the cost of labor involved in retrieval. Sehgal walks readers through the two types of cross docking, planned and opportunistic, explaining how to go about implementing both. No matter what though, he’s emphatic that any type of cross docking requires an ERP system that gives firms a holistic, and more importantly, real time view of their organization. Without this, coordinating any sort of cross docking attempt becomes impossible.
Hopefully the economy will make a rebound in the coming months, but businesses should be prepared for the possibility that it won’t. In that case, perhaps there’s something in these articles that can help you survive the worst that’s to come.
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