COST CUTTING/CONTROL MEASURES -
“NEED OF THE HOUR”
Various discussions on cost cutting/control measures at every functions/processes across the organization to enhance bottom line and ROCE (Return On Capital Employed)
At all factory / offices, effective controls on following points are to be strictly ensured with immediate effect in close coordination with support Departments at HO, as required:
· Effect of overstay on overheads and bottom line:
Execution has to be done in practically possible earliest time period with minimum work in progress at any point of time and dispatch of material to customers expedited. Overstay is to be avoided even if there are initial delays from Clients side. Considering overheads as about 5 %, overstay by 50 % of contract period leads to erosion in bottom line by 2.5 %
. We are working at meager margins and can’t afford overstay anymore.
· Effect of overstay on Plant Machinery cost and bottom line:
All Plant Machinery and other Assets should be put in to optimum use. All Plant Machinery should be in best working condition with least down time for maintenance. They should be put to full use without any idling.
· Proper work/quantity planning, right from receipt of order, supported by resource planning is a must and will ensure completion of order in time Any execution plan without resource plan is incomplete and waste.
Planning is a dynamic process requiring atleast quarterly revisions, seeing the progress. Monitoring and coordination is equally important. Progress achieved during the day and plan for next day activities are to be reviewed every day late evening, by the factory In-charge with key senior staff at factory level to avoid/address slippages. One should always remember PDCA Cycle
(Plan Do Check and Act
· Control on material usage
is a main activity to improve bottom line. Monthly reconciliation is a must to understand the wastages and to control. On an average, about 60% ~ 80% of the order value is from materials and if we are able to achieve control on materials, it may result in bottom line improvement by minimum 3%.
Inventory at any point of time should be minimum and economical but at the same time adequate enough for uninterrupted working. Proper and effective security is a must to ensure zero pilferage.
· Outstanding dues from Clients
are to be realized at the earliest possible time. We have to put pressure on clients for early release, by raising bills toward interest accrued, especially when the amounts are blocked beyond the specified credit time limit. Delay in realization of payments beyond contractually stipulated time period results in drastic reduction of ROCE.
· Another way of increasing ROCE is by ensuring bare minimum Working Capital
. This can be achieved by timely realization of dues from Clients, availing maximum possible credit facility from suppliers/vendors, getting the works done with good and best quality, minimum work-in-progress and minimum inventory at any point of time, etc.
· Cost Control in Offices:
Pooling of vehicles, good and effective use of all materials, control on idle/underutilized generator running, control on water and electricity consumption, right quantity of HR, etc.
· Works are to be executed properly without any requirement for reworks. i.e., right work at the first instant itself
· Human Resource:
This is most important resource. Good talents are to be identified and all out efforts to be ensured for retaining them. Factory / office In-charge to regularly impart required guidance/directions/knowledge to all the staff. Every one should be given clear cut roles & responsibilities and made accountable for their acts. Good and skilled work force is becoming scarce. It is the responsibility of In-charge to ensure they are retained and obtain best possible productivity.
If we follow all above aspects meticulously, I am sure that we shall reach near excellent performance at our self, which in turn would give utmost satisfaction to all of us besides increased ROCE
and bottom line.
“THIS IS THE MOTTO OF THE DAY AND NEED OF THE HOUR”. 22nd January 2009 From India