How can companies reduce costs and increase efficiency?
How can companies reduce costs and increase efficiency?
For companies, cost reduction (cost cutting) is an essential element in securing maximum profits. However, since there are many different types of costs, it is not uncommon for companies to have trouble deciding which costs to cut and how to achieve them.
This article explains specific ways in which companies can reduce costs and increase efficiency. We will also introduce the process of implementing cost reduction and examples, so if you are in charge of a company that wants to reduce costs, please refer to this article.
Content
- Cost Reduction Overview
- Process for implementing cost reduction
- Three ways to reduce costs
- Two examples of cost reduction
- Summary
Cost Reduction Overview
Cost reduction refers to the reduction of wasteful costs and expenses incurred by a company in the course of its operations. Although the types of costs incurred vary from industry to industry, the following items are basically incurred as costs.
Labor cost
Recruitment cost
Office Cost
IT equipment-related costs
One of the most difficult costs to reduce is labor cost. Labor costs can be broken down to include transportation and training costs. While it is the most costly item, it is also essential to the operation of a company, and it is not uncommon for managers to worry about reducing labor costs.
Benefits of cost reduction
If you can achieve cost reduction, you can enjoy a variety of benefits. Typical examples of benefits are as follows
Can increase profits.
Cost reduction is necessary to increase the profit of a company. A company's profit is equal to its sales minus its costs, and the more costs it reduces, the more profit it can earn.
Improve business efficiency.
Cost reduction can not only increase profits, but can also improve operational efficiency. By working on cost reduction, you may be able to reduce wasteful operations as a result of reviewing the way you conduct business.
Corporate value will increase.
The cost savings can be used for new business development. If innovation can be achieved, corporate value can be enhanced.
Process for implementing cost reduction
Cost reduction is generally carried out in the following manner.
Understanding the current situation and setting goals
Decide on a plan and communicate the goal
Implementation and analysis of the plan
Improvement of the plan
Here is a detailed explanation of each of these processes. Let's take a look at the key points of cost reduction to achieve cost savings.
STEP1: Grasping the current situation and setting goals
When working on cost reduction, try to understand the current situation of what costs are currently being incurred. Without a clear understanding of what costs are being incurred, it is impossible to determine the types of costs that need to be reduced. It is important to understand all the types and amounts of costs that are being incurred.
It is also essential to set goals for cost reduction. If you proceed with cost reduction without setting a goal, employees may not know how far they should go, which may lead to a loss of motivation.
STEP2: Decide on a plan and make your goals known
Once you have decided which costs to cut, create a cost reduction plan. When creating the plan, make sure to predict whether the cost reduction will be detrimental to your company. If you make a plan without making a forecast, you may end up cutting costs that do not need to be cut, which may have a negative impact on your company.
The plan you create should be communicated to your employees. Cost reduction can sometimes be an inconvenience to employees. Communicating the reasons and goals for cost reduction will help employees understand and cooperate.
STEP3: Implementation and analysis of the plan
This is the step where you implement the plan and analyze the effects, etc. Even if you have taken cost reduction initiatives, you may not see immediate results. Be sure to periodically check on the results of your efforts.
It is important to conduct a specific analysis of the plan. Simply stating that you did not reach the expected goal does not clarify the next action to be taken. Make it easy for everyone to check, for example, by expressing the achievement rate in numbers.
STEP4: Improve the plan
If your cost reduction efforts are not yielding the desired results, you must work to improve your plan. First, think of an improvement plan and choose one that is easy to implement. When thinking of improvement plans, soliciting ideas from as many employees as possible may help you come up with innovative ideas.
It is also important to seek the cooperation of employees again when implementing improvement plans. Without the cooperation of each employee, it will be difficult to make improvements.
Three ways to reduce costs
There are three main ways to reduce costs. The details of each are as follows.
Manualize your work.
If you want to promote cost reduction, make sure that your operations are manualized.
The first thing that becomes a burden for employees is to learn the work. If the work is not manualized, the content of the training may change depending on the trainer who teaches the work. As a result, employees may have doubts about the content of the training and may have to spend extra time to resolve their doubts.
If you have a manual for your work and a separate manual for training, you can implement training relatively smoothly.
Go paperless.
Another way to reduce expenses is to promote a paperless office. Using chat tools, sending documents in PDF format instead of paper, and other IT-based business processes can reduce costs.
However, it tends to take a long time to promote a paperless society. Let's start with what we can easily do, such as proactively using lined paper.
Use e-learning.
One way is to use e-learning so that employees can learn on their own.
With e-learning, learners can use digital devices such as smartphones and tablets to learn when and where they want. There are many advantages to e-learning, such as not having to gather employees for training and development, and not having to pay for preparing materials. If you are a company that wants to reduce training costs, consider using e-learning.
Two examples of cost reduction
If you want to tackle cost reduction, check the case studies in advance. Here are two examples of successful cost reduction efforts.
Case 1:.Big-A Corporation
Big-A Inc. is a company that operates a number of hard discount stores throughout Japan. The company had been facing the issue of "long hours spent on training. To solve this problem, the company changed from paper manuals to manuals that allow users to check the contents with images and videos using their smartphones, which has reduced the training time.
Case 2:.Early Cross Tax Corporation
Early Cross Tax Corporation was hiring inexperienced staff and had the problem of having to train them on the same content every time they were hired. As a result of introducing a system that makes it easy to create manuals, the company has succeeded in reducing the time required for human resource development.
If you want to create manuals that are easy for your employees to understand and highly effective in training them, use learningBOX. learningBOX has many features that are effective in manual creation, such as the ability to monitor the learning status of learners at a glance, and the ability to use a quiz format to increase the level of understanding of learners. It also has many features that are effective in manual creation.
Summary
In this article, in addition to the methods and process of reducing training and development costs, we also introduced the benefits of cost reduction and case studies.
Cost reduction is an important aspect of business. There are many benefits to cutting costs, including increased profits and operational efficiency, so let's start with what we can do.
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