How to manage cost reduction in dark times?

Filed in archive Point of view on December 14, 2008

Deloitte has recently published a debate on supply chain cost reduction in hard times. You can read the full debate here, in any case, my takeaways from it are the following:

- Companies in sectors such as CPG, should go for cost reduction but not investment reductions. Many of the supply chain capabilities which are required to maintain sales and profit levels (e.g. recipe management and complexity reduction) are relatively new to many players and reducing investments might not seem a good idea.

- In order to reduce costs, it's good to start from revenue streams. That might seem crazy but you should always remember, some markets and customers aren't worth serving.

- One good strategy to reduce cost, especially in High Tech sector, is to do in the interface with the clients. Many High Tech companies are creating tiered service layers (gold, silver, bronze) for different client segments. This has helped them get more control over cost of the service for the low end segments.