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The term "cost reduction" is it down sizing the organization or reducing manpower or other factors?

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Question added by Mohammed Yassin , Executive Vice President , Saudi Marble & Granite Factory Company - SMG
Date Posted: 2017/04/03
lubna almasri
by lubna almasri , administrative assistant manager , Virtual World for export and import

The process of looking for, finding and removing unwarranted expenses from a business to increase profits without having a negative impact on product quality. Many business managers will engage in periodic cost reduction drives in order to make their company's operation more efficient and to boost profits

BARKAT ALI
by BARKAT ALI , SUPPLY CHAIN CONSULTANT & LOGISTICS EXPERT MM CERTIFIED SAP LE TRAINER(FI-MM-SD-WM) LEAN MANAGEMENT , BARKAT EDUCATION SOLUTIONS AND TRAINING(BEST) AND Managing Trustee Logistics Council

I would say Application of Lean Management can reduce the cost.Lean management is nothing but reducing the wastage like time, energy, movement, etc. thereby reducing the cost. The application of Lean Principle can be done on following areas of logistics to minimize cost and maximize profit. 

Plus If you go for Strategic Alliance it will help a lot

Arif Mahmood
by Arif Mahmood , Procurement Manager / Supply Chain Manager , Safety Assets Establishment for Trading & Contracting, www.safetyassets.net

It’s a process to cut all the unwanted costs and increase the profitability without having any kind of negative impact on the quality and productivity of the business. Such cost are extra burdens and can be removed from each sector of the organization. There can be a long list from where the costs can be reduced and hence can increase in profit. All the companies exercise this practice from time to time through their department managers and cost control experts. 

Ahmed Mohamed Ayesh Sarkhi
by Ahmed Mohamed Ayesh Sarkhi , Shared Services Supervisor , Saudi Musheera Co. Ltd.

in Arab meaning reduce staff

but professional should be reduce more cost no need to pay and check ur procurement to find cheep supplier 

Deleted user
by Deleted user

"Cost Reduction" is a technique used to reduce the cost of the production without compromising its quality, by finding and trimming away unnecessary expenses.

Another similar term is "Cost Control", a method which provides the necessary information to the management that actual costs are aligned with the budgeted standards or not, and to rectify the deviations if any.

Abdul Sattar Abdul Rasheed
by Abdul Sattar Abdul Rasheed , Supervoisor , M/s. Samara Trading Company

Thank you for the invitation. regret delay in answer. Yes, "cost reduction" warrants in certain circumstances like :stiff marketing competition with same product /stock pile up / faire of expiry date/ Failure of incentive packages Etc.,

Then management has been forced to draw a contingency plan for cost reduction which includes various aspects like administrative Exps / Manufacturing exps / Sales exps / Etc.,

 

 

Nadeem Asghar
by Nadeem Asghar , Supply Chain Consultant/Trainer , Independent Practitioner

Agree with very pertinent and precise reply given by  lubna almasri

Terrence Walmsley
by Terrence Walmsley , Owner , The Awesome Group of Companies

Cost reduction implies that there may be inflated costs tied to a specific function. This could be operational processes, manpower, raw materials usage, equipments, etc.

A review of income against expenses should identify those areas in need of cost reduction.

The function or target area needs to have a thorough investigation to understand the implications and impacts, cost reduction will bring.

Shihabudheen Abu Backer
by Shihabudheen Abu Backer , Supply Chain Manager , BAUER KOMPRESSOREN GCC FZE

‘Cost reduction’ doesn’t mean specifically employee lay off or downsizing the organization. The term is apt what intended to mean it. There are positive and negative effects of cost reduction. Following process is positive in financial terms:

Value engineering:  It will help you to configure your product by removing unnecessary features, to reduce cost and get better profit margin.

QMS : An advanced quality management system will help you to reduce your cost by preventing / eliminating re-works or product call back. Initial cost of QMS will be there, but it will help you to reduce cost in log terms in many ways.

Training / Coaching : It will develop the skills of employee, long  terms  it is fruitful to the organization. It will help to improve productivity, decision making and finally leads to cost reduction.

ICT : Information & Communication  Technology, ERPs are caused to cost reduction of most of the corporate giants in a great extent.  

Above listed are few examples of cost reduction for positive results and it is advisable, on the other hand, cost reduction may effect and result negatively:

Production Cost : Cost reduction of a product may leads to side cuttings of quality, reworks, product call back, market share loss and reputational risk. All these factors may lead to a cost increase!

 

During the period of economic recession cycle, organizations and individuals are talking about cost reduction; it is tactical and mostly necessary for the survival of the organizations. This may include employee lay off or downsizing the operation. 

Ibraheem Syed
by Ibraheem Syed , Logistic Manager , U.S. Army

Cost reduction never means downsizing the employees. The questionable issue is, if the company is unable to produce revenue, then they shouldn't have hired that employee. The more productive thought would be "how to increase revenue and earnings" and "how to stand out against your competition".

If we concentrate on better marketing, increase quality, reduce waste, evaluate charges and analyze delinquencies then we can move forward in a more constructive way than "downsizing employees".

Obaid ur Rehman
by Obaid ur Rehman , HR Executive , Al Bahr Al Arabi Marine Engineering Services

Its about right sizing and minimizing the waste of time and money. 

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