When the Going Gets Tough…Cut Expenses Through Improvement

If you’ve been fortunate enough to have a booming business or have played a part in building a “unicorn” company, you probably haven’t felt the need to cut expenses. Unfortunately, not every company can withstand the impact of difficult times. In fact—and don’t hate me for ruining the dreams of little children out there—even unicorns falter and become undercorns and horses.

What do you do when it’s time to make tough decisions and cut expenses? Where do you begin? Cutting expenses gets complicated because, presumably, expenses support your business. But that’s not always the case. Here are some constructive suggestions for areas to reduce or eliminate expenses:

1. Lower Manufacturing Expense Through Improved Yields. Improving yields is all about quality. Minitab has countless case studies on different improvement projects that resulted in significant amounts of savings.
   
   
2. Reduce Energy Consumption to Cut Down on Utilities Costs. Utilities are major expenses for both small and large businesses. Using predictive analytics can help reduce energy consumption at manufacturing plants and even help you lower energy bills in office buildings.
   
   
3. Reduce Warranty Expenses by Properly Predicting Them. Warranty expenses can vary widely by organization, by industry and product type, but typically range from 2% to 15% of net sales. That’s a significant expense that could be significantly reduced by taking a data-driven approach to estimation. Predicting warranty expense could prove that your expense is overstated, therefore creating “savings” instantly.
   
   
4. Optimize Inventory to Reduce Inventory Costs. Minitab’s supply chain module provides a number of ways data analysis can reduce costs from your supply chain, from simply visualizing Days Sales of Inventory to understand how much you’ve got on the shelf to forecasting demand to run a leaner operation. Alternatively, use structured problem solving tools like Value-Stream Maps to reduce supply chain inefficiencies.
   
   
5. Eliminate Waste. Wasted resources cost money and wasted work means wasted opportunities to be more efficient. Using lean tools to pinpoint waste can help you quickly find cost savings.

If you’re fortunate enough to have a continuous improvement team (also sometimes call Operational Excellence team) on staff, leverage them more in tough times. If you’re making a go of it yourself, check out all our resources and services that could help you.

Want to talk to someone about this? Talk to Minitab.