Cost Reduction & Control in Manufacturing Sector

Topics: Supply chain management, Costs, Inventory Pages: 36 (10347 words) Published: February 6, 2012
Cost Reduction
There are right cost reduction techniques and there are wrong ones. Using the right strategies will result in a more efficient company spending. Using the wrong techniques will create a reduction of expenses required to maintain product quality and company value. It is a fine line sometimes, but a systematic approach can help managers avoid making serious mistakes in the rush to cut expenses. Cost management strategies should be utilized as components of a larger objective to maintain maximum profitability. As such, cutting expenses will be just one part of a plan that focuses also on maximizing revenue. Effective techniques will begin with the setting of goals and objectives. There can be many reasons why a company might need to cut costs. * To create additional cash reserves

* To reduce price of product or service
* To bring expenses in line with revenues
* To eliminate unnecessary expenses or wasteful spending * To increase company value
* To increase competitive advantage
* To move costs between departments
Identifying the goal of the expense reduction exercise will assist with implementation of an effective plan. In other words, if you don't know why you are cutting costs, how are you going to know where to cut costs? The purpose of expense reduction is to help the company towards long term survival. Purposes of expense reduction include: * Create cash for reinvest in research and development

* Reduce manufacturing costs to stay competitive
* Reduce costs as a non-profit so able to serve more people * Lower costs of service in order to provide additional services * To become more efficient
* To prevent employee lay-offs
* To prevent reduction in employee benefits
Cost reduction techniques should also be evaluated in terms of impact on the organization. Prioritizing the goals of the cost cutting program will insure that the strategies are implemented appropriately. There are many different ways a company can institute a plan to reduce expenses. * Across the board reductions

* Prioritized reductions
* Departmental reductions
* Reductions based on professional assessment
* Budget reductions
Cost reduction techniques can be an important strategy for another reason. They can teach a company to be economical, by forcing a regular review of spending at every level of the organization. It can keep a company vital and streamlined. Cost Reduction News

Wilsons Leather Announces Aggressive Cost Reduction Initiative Wilsons The Leather Experts Inc. WLSN today announced that it will embark on a strategy aimed at reducing its mall store base, aggressive cost cutting initiatives, and the launch of a new accessories store concept. As part of this initiative, the Company plans to close up to 160 mall locations that do not fit its go forward strategy. Concurrent with these closures, all remaining 100 stores in the mall division will be re-modelled to a new "Studio" concept, which the Company has been testing since last fall in four different regions of the country. This concept will be a brand driven store for women focusing on fashion accessories. Plans are to complete all 100 mall store remodels by August of this year. In this process, approximately 938 store-related positions will be affected. Wilsons Leather Outlet Division will not be affected by this new mall store initiative. "The decision to take these actions, while very difficult, is the right move for the future of Wilsons Leather," said Mike Searles, Wilsons Leather's Chief Executive Officer. "We expect the cost reduction initiative will enable us to reduce our working capital needs and strengthen our business, as well as provide capital for our remodel efforts to convert all remaining mall stores into our new "Studio" concept. Initial test results for the Accessories business in our new concept stores are very exciting and we look forward to rolling out this...
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