Whether our companies are underperforming, performing or expanding, it pays to avoid unnecessary costs and address cost efficiency across the board. This article covers key ways for improving cost efficiency - from analysing which products and services generate the most sales to reducing overheads.
Underperforming companies often need to urgently address their cost structure which is not aligned to the sales levels in the business. Expanding companies also need to constantly pay attention to their cost efficiency and avoid unnecessary costs, unproductive activities and resources building up in corners of business.
Improve your gross margin % by improving material purchasing and direct labour efficiency.
Reduce Rationalise the product range. Look hard at the 80% of products that are producing 20% of sales.
Consolidate suppliers and negotiate improved terms with fewer suppliers.
Join a buying group.
Reduce slow-moving stock.
Identify if there is overmanning in direct labour and if there is an early quit problem. Monitor how direct labour is used.
Maximise utilisation and productive hours.
Reduce overheads as % of sales
Make sure the management structure is appropriate to the size of your company.
Get the most from your investment in people-related costs.
Deal with the underperformers and the terrorists in your organisation.
Eliminate non-value-added activities.
Increase employee productivity. Put goals and measures in place for each role. Get good at performance management.
Determine what activities are core and then outsource the rest.
ACTION POINT
Decide which opportunities for improving cost efficiency are most relevant to your business. Then, take action. If you would like some fresh thinking on how to improve the cost efficiency of your organisation, drop us an email at info@rathboneresults.com or ring 020 8798 0175
Jim Rathbone
Book an exploratory call to find out how we can help you unlock your business potential.
