Among other things, consultants help their clients, usually companies, realize and then achieve certain goals. They help increase the number of customers and improve customer satisfaction. They claim to help define or redefine a company’s goals and increase employee motivation and work performance. Consultants assist in coaching employees and improve an organization’s operational needs. By and large, consultants exist to help institute cost reduction measures – this is their bread and butter, so to speak.

While consultants may appear helpful, however, there also some potential drawbacks.

First, consultant groups can be very expensive, which appears to contradict their being hired to institute cost reduction methods. Depending on the number of man hours, their bills can quickly and easily add up to the thousands, and this can be very costly to companies that do not have such capital simply lying around or are experiencing tough times.

Second, despite their claims otherwise, consultants may not be helpful for cost reduction, and it is up to you, as the company owner, to determine if these groups are worth the investment.

• What are they really going to do for you and your business?
• How will this increase profits?
• Are they just regurgitating obvious information that is simply packaged well?
• How much investment will this require?
• Can you do it yourself?
• What can they offer that makes them worthwhile?

These are important questions that can result in the spending or saving of thousands of dollars, if not more. As a company owner, you must determine what is in the best interests of the company and what is simply unnecessary. Perhaps specialized consultants for a narrow area would be more helpful than groups that are there simply to help initiate layoffs.  In addition, often times they will only make recommendations which you will then have to implement yourself further costing you time, money, and resources.

It is almost ironic that consultants, who are often hired for cutting costs, may themselves be a cost that ought to be cut, and you must be proactive in determining their necessity.  Consultants can delay decisions as well as puts them in their hands.  Often times, you as well as your managers know more about your business than outsiders.

So try these tips

• Put the consultant’s pay on a performance basis.  This will will save you lots of money.  If goals and objectives aren’t met, no pay.
• Most of the times consultants bill hours and use your employee’s knowledge.  Learn to use template based consulting where the employees do most of the work and then hire a consultant just to manage the process.  This can often cut your consulting fees in half and makes more sense.

By following the guidelines in this blog, you can often eliminate, if not cut in half you annual consulting expenses in half.  If your interested in a cost reduction blueprint click here .

Below, list any suggestions or tips on how to further lower consulting costs.

Importance of Employee Suggestions in a Cost Reduction Strategy

Your employees are the driving force behind your organization and are valuable assets to the company. Utilize their knowledge and experience by asking them for suggestions or feedback as to how you can improve the business. Your employees are the first point of contact for customers and represent your company. While you may be implementing productivity and efficiency policies upstairs, they could have a negative effect on the floor.

According to recent studies, only 41 percent of employees think their managers listen to their ideas, which hinders innovation and leads to detrimental communication problems down the road. The same study indicates 37 percent of respondents felt their company’s management was inaccessible to them. Suggestion programs have a bad name because corporations would implement – but never listen to – employee suggestions, which is why 60 percent of respondents indicated their company’s suggestion program was inefficient.

Employees experience your business from a different perspective, offering profit building advice and feedback about company policy you – or your colleagues – developed to increase efficiency. You can only derive so much information from facts and figures, which is why employee suggestions are vital to your business’s success. A research firm calculated each employee suggestion to be worth $6,000 in a cost reduction strategy, with small and large companies seeing savings of more than $300,000 annually, with only a 54 percent participation rate. Each suggestion sparks innovation and decreases operational expenses and supply costs. Each idea saves a little money, time, makes their job easier, improves customer satisfaction, or in some way makes the business more efficient.

Why Use Employee Suggestions?

Employee suggestions improve your business by building teamwork, removing barriers, saving money, boosting morale, and ensuring compliance with government regulations. Suggestion programs increase cost reduction efforts and inspire employee confidence by showing them you care about their ideas. Those employees frustrated with the current administration have an outlet to voice their concerns in a non-threatening environment. The suggestions spearhead cost reduction efforts by increasing efficiency while reducing expenses. The suggestion programs also ensure your organization is compliant with the Sarbanes-Oxley Act, which requires companies to allow employees to submit anonymous messages to the company’s review committee.

Business Process Improvements

View your company as an intricate system of processes, each of which works together to create a product or service. Business process improvements and cost reduction strategies work together eliminating waste, increasing productivity, maximizing effectiveness, and reducing labor costs. Each action your organization takes to produce a product or service is a process. Use employee feedback in addition to cost reduction in order to simplify, merge, and remove wasteful processes that are not profitable.

Employees are the people executing your business processes, thus they have the knowledge and information to expedite the process. They are the experts regarding the manufacturing or production process and should be treated as such. Use their suggestions and match them with the appropriate business processes. Once the suggestions are matched appropriately, analyze the current process in comparison to the employee’s suggestion. Implement the proposed change if it saves time, money, or human resources without interfering with rigid quality control standards.

Use Technology to Monitor Suggestions

Technology automates and streamlines the process of improving your business using employee feedback. The software applications enable businesses to input their current processes into the system and modify the processes using the employee suggestions. A simple What-If report analyzes the suggestions and determines whether the changes are profitable, saving the company additional capital investment on trial and error. The programs simulate the events before they occur, reducing implementation costs and improving productivity.

The suggestions can be deployed immediately and are compared to the previous implantation. Employers tweak and modify processes based on employee suggestions and policy documents. The software programs offer a low cost of implementation and high returns of investment. Depending on the solution your business chooses, BPM programs define, analyze, and document business processes, improve operational effectiveness, build innovative solutions, and provide detailed reporting and metrics.

Cost Reduction: Surviving in a Globalized Economy

Globalization and the Internet create a global marketplace that allows customers to shop from stores around the country. Globalization is a threat to American businesses and requires companies to gain the competition by offering the lowest prices possible. For cost reduction to work, companies offer lower prices on their products while lowering internal costs. Increase revenue generation by eliminating wasteful business processes, lowering labor costs, reducing supply expenses, and increasing sustainability.

Organizations can significantly reduce their supply costs via cost reduction. Raw materials and supplies are business expenses that can – and should – be minimized to increase revenue. Engage with the suppliers or vendors to create a cost effective strategy for your organization by using managed inventory programs, reducing shipping and transactional costs, decreasing lead times, and reducing the amount of inventory you carry at any given time.

Cost reduction strategies indicate monitoring the business process work flow for inefficiency which can reduce labor costs. Reevaluate your staffing needs by pairing each employee with a business process, and determining sustainable work levels by monitoring the floor. Avoid over and under staffing as each lead to decreased profitability through conflict. Consider removing or merging inefficient processes in the organization in order to streamline the process, automating as many tasks as possible.

Below, list your own or other business cost reduction techniques and savings.

Driving Profits by Reducing Costs

Cost reduction attempts to increase profits by reducing costs elsewhere, primarily from quality control and production quality. Businesses find ways to get cheaper supplies of lesser quality, selling smaller products for more money, and eliminating important quality control steps in an effort to lower labor costs. Reducing expenses is a viable option, however; businesses are too concerned with regaining profits that they forget the importance of creating durable products. Reducing inventories, using cheaper parts, and limiting production creates headaches for consumers who have to wait for the products to arrive.

Companies can decrease costs associated with the hiring of new employees by keeping retention rates high. Current employees who are satisfied with their current position are less likely to leave midway during their careers. Studies indicate happy employees are more productive workers, have lower absenteeism rates, and add value to the organization. Employees who feel connected to their managers and bosses are less likely to leave and more likely to contribute positive suggestions to the business strategy, reducing operational expenses.

Managing the Business Strategy

Businesses can significantly reduce labor expenses by engaging in business process improvements, which is a systematic approach to managing business operations. The mechanism ensures companies remain focused and concentrated on their business strategy. Processes are steps in the manufacturing or production environment, executed in a specific order known as the work flow. Companies streamline and automate processes by eliminating unprofitable tasks, merging activities, and increasing efficiency.

Optimizing processes reduces the amount of labor needed to complete the manufacturing process. Additionally, it enables businesses to monitor employee performance levels, provide clear job descriptions, and increase employee accountability. Businesses optimize processes by soliciting and listening to employee feedback, using business process management software to evaluate and implement the ideas.

Business Sustainability Works But is a Slow Process

Companies can ensure a sustainable future and profit from the “Green” movement by reducing their dependence on natural resources. Participating in recycling programs and using recycled office supplies saves the environment while increasing profitability. It takes 50 percent fewer resources to produce recycled office supplies, which are the same quality as new products. Companies leverage their sustainability efforts by receiving state and federal tax breaks by reducing their emissions.

The zero waste initiative is an offspring of the sustainability movement, which states that companies can increase profits by maximizing resource efficiency. In a zero waste scenario, companies reuse the waste they produce during the manufacturing process. Companies minimize their waste by monitoring their inventories, ensuring every product is used before its expiration date. Zero waste companies avoid ordering in bulk and reuse packaging materials whenever possible. Large corporations such as Xerox re-engineered their business strategy to include zero waste initiatives. However, it took several years for them to achieve returns on their investment.

You don’t have to be a Six Sigma Black Belt to understand that there is not an easy fix for our workforce. Corporations and Americans in general, utilize the band-aid approach, a cheap solution that masks the symptoms without doing anything to solve the underlying problems. All of these programs offer businesses a miracle “quick fix,” only for the problem to relapse after a few weeks. There needs to be a permanent solution that addresses business strategy issues from the bottom up by modifying business strategy.

Please leave all feedback and criticism below. All input is welcomed and appreciated.

Reducing business costs reduces layoffs and increases morale by developing a stronger organizational focus. Customers notice an improvement in quality and service as you improve business processes through utilizing a systematic approach to thinking. Cost reduction increases your bottom line, resulting in additional revenue.

Optimize Resources for Cost Reduction

Combined with business process improvements, you can reduce supply and labor costs without sacrificing quality. Every action your business performs to create the desired product or service is a process. These processes work in unison with your business strategy to meet the goals and objectives of your operation.

You can reduce labor costs by minimizing waste and down time within the processes by merging tasks and removing inefficient processes. Rather than laying off employees, optimize the workforce by pairing employees with available work, shifting and adjusting resources as necessary.

Businesses implement strategies for a variety of reasons, including their desire to reduce costs while passing the savings onto their customers. The strategy enables merchants to beat competition, offer employees stability, and leverage against the threat of globalization. Cost reduction programs are implemented by setting goals, creating, evaluating, and implementing options, and measuring the outcomes. The work flow preserves ideas that are generated by the employees.

Driving Sales, Cutting Expenses

The most common way to increase profits is to drive sales. Traditionally, businesses spend money on advertising and marketing, however; these options are expensive. The sales force has to sell more products than before, recovering associated advertising and marketing costs. Reducing expenses results in higher profits for fewer sales, streamlining the process and creating a faster way to drive profits up.

Before you begin choosing expenses to cut, start looking at the expense reports from the previous year. It is important to identify seasonal trends, monthly patterns, and holiday sales. Create a spreadsheet that classifies the expenses based on type, such as labor, wages, benefits, supplies, materials, and real estate. Use the Pareto principle and sort your expenses based on importance and estimated cost savings, targeting the most expensive items first.

Evaluate each expense to determine what impact reducing it would have. For example, identify how easily the expense can be controlled, whether it impacts quality control standards, or if it interferes with state or federal compliance. Determine what the impact would be on customers, employees, and shareholders. How much resources, investments, and time would it take to reduce the expenses? Consider other variables such as political acceptance, support from management, and any other impacts.

There are a variety of ways to reduce expenses, including offering training and informational seminars, improving production quality, shopping smarter (i.e. using different materials or getting a better price), reducing waste, improving productivity, reducing inventory, improving workload management, streamlining operations, strategically planning, improving business processes, as well as solving and preventing problems. Ensure your cost reduction strategy is easy to install, provides return of investment (ROI), requires little effort to maintain, is evergreen, as well as have the ability to adapt and grow with the organization.

Cost reductions must be carefully implemented by evaluating the impact they will have on your organization. A change in the business process may disrupt the work flow and cause more harm than good. To ensure the longevity and success of your program, ensure the cost reduction process is taken seriously and implemented throughout the business, using company objectives and goals to support your efforts. The formality of cost reduction ensures it will remain part of corporate culture, as reducing costs does not negatively impact the organization.

Smart Cost Reductions Equal Big Payoffs

Cost reduction strategies enable companies to offer extended services and products in addition to a synergized delivery mechanism. Customers appreciate the extra mile these companies go to, thus increasing profit and market share. The main goal of any strategy is to offer continuous business improvement, which is an integral part of large and small businesses alike. The costs to administer such cost reducing strategies finance themselves within the first year. Cost reduction programs do not have to be complex – even the simplest business improvements do wonders for companies.

When launching a reduction program, attempt to cover all of your bases to avoid confusion down the road. Having a solid foundation paves the way for success. Keeping tabs of your strategy throughout the year is also important, which is why upper management must endorse your plan. Ensure the document is embedded in corporate memos, tracked via monthly reports, updated on a regular basis, included in your business plan, prevalent within the company, integrated into your budget, and most importantly, encompasses everyone within your organization.

Stay Lean, Be Competitive

Consider utilizing a cost reduction program if your company has global competition, experiencing increased operational and production costs, has pressure from competition, is in a mature market, has less-than-pleased investors, experiencing diminishing market share, encountering difficulty on the sales floor, and are considering layoffs in the near future if situations remain stagnant. Using the strategy to reduce costs eliminates layoffs by increasing profits from within the corporation.

These innovative strategies rely on the theory that customers shop around for the best price, by reducing costs within the organization you can afford to pass on the savings, gaining a large percentage of the market. It is becoming more difficult to compete because of the Internet and global marketplace, which is why you need to lower costs to stay ahead of the game.

List below additional tips, input, and strategies to reducing business costs by reallocating resources such as employees and supplies.

The typical American manufacturing plant takes more than it produces, as it utilizes energy and materials to create a product that becomes waste in a set period of time. Additionally, manufacturers almost always order more materials than they need, which expire and become waste. For example, if a company produces boxes of cookies, the packaging of the product enters landfills once the product is consumed. A successful zero waste program captures the waste and puts it to use, rather than having it pollute the environment.

America’s waste problem is most noticeable in the packaging of consumer edibles that come in disposable containers. While the product may have a shelf life of three months, the packaging takes thousands of years to biodegrade. The problem is a growing concern given the mass amount of pre-packaged foods Americans purchase each year. In a zero waste system products have longer shelf lives and the packaging is either reusable or biodegradable.

Profitability of Business Sustainability

Business sustainability and zero waste measures are good for the environment and offer substantial financial incentives. Source reduction is at the root of the zero waste initiative, which is the money a company saves by minimizing waste in the organization. Waste is an expensive byproduct as it is expensive to produce and sometimes equally expensive to discard. Zero waste is lucrative and sparks innovation within an organization, achieving results that far surpass similar prevention or reduction programs.

Successful corporations such as Hewlett Packard, Xerox, and Interface saved millions of dollars by implementing a zero waste initiative. For example, Interface, a carpet manufacturer, successfully saved $165 million in waste by recycling carpet – turning old carpet into new flooring, which reduced the amount of oil they required. Additionally, their factory was partially powered by solar energy. Xerox, one of the world’s top-grossing copier firms, saved $2 billion by reusing printer and copier parts in new machines. Additionally, HP saved $800,000 by using reusable pallets for the transportation of its products.

Implementing a Zero Waste Initiative

The cost savings and environmental benefits of the zero waste initiative outweigh the upfront capital and human resources it takes to launch such a program. The process of reaching zero waste takes several months to complete, with most organizations seeing viable results after the first year. The hands-on process involves every member of the organization, with a core team or steering committee overseeing the initiative. The first step to launching a company-wide initiative is to introduce the concept of zero waste to management, particularly those in charge of making environmental decisions. Employees and other management should not be aware of the initiative until company executives approve it.

Once management approves the business sustainability initiatives, develop a team of dedicated employees throughout the organization. Once the committee is staffed, schedule a launch meeting to kick off the project. The first meeting establishes the mission statement, purpose of the project, and reinforces the company’s commitment to reducing waste. Review the documents, rules, and policies provided by management, designate roles, review time commitments, and provide an overview of business sustainability.

Collaboration and brainstorming are essential elements of a successful business sustainability plan. Develop a list of waste categories that your organization needs to target. Do not limit the number of ideas, however; once the brainstorming is complete vote on the top ten categories. Rate the categories in order of importance and disseminate the results to committee members for future reference. Next, identify the sources of waste within the organization followed by real life examples of each. Communicate the results of the initial investigation with business sustainability executives and employees affected by the findings.

To achieve zero waste one must identify how much waste exists in the organization prior to the initiative. Work with company executives and waste management officials to determine the amount of waste created in each of the categories drafted previously. Additionally, break down the waste by type, providing a preliminary business sustainability report for management. Consider using visual aids such as pie charts and bar graphs to display your results.

Review the results in committee, identifying the categories producing the most waste. Focus on the top grossing waste categories by producing a list of questions to ask appropriate shareholders. Consider who has the information you need to know and how you can communicate effectively with that person. The questions and answers serve as the basis for the business sustainability investigation.

Once the priority groups have been defined, begin to brainstorm business sustainability and waste reduction strategies used to increase business sustainability. Vote on the top three strategies that reduce the most waste while increasing profitability. Research and flush out the strategies, bringing the results to management. Identify the best strategy with management.

The business sustainability steering committee is responsible for the execution of the project. Create an overall objective for the project, followed by specific roles and responsibilities of each committee member. Create a step-by-step plan identifying what will be completed, by whom, when, and at what cost. Provide a list of resources and an acceptable timetable. Execute the steps and review the project results with appropriate shareholders. Once the project is complete, tackle the remaining strategies until zero waste and business sustainability is achieved.

Please list below feedback, examples, and savings from zero waste initiatives and how businesses can become more environmentally sustainable.

Your strategy should help you achieve the objectives of your business. A business strategy is the driving force behind any organization, and takes the form of an official report. Businesses are self-sustainable systems, when you change one thing in the system; it has a positive or negative chain reaction. Like an organism, businesses learn how to adapt to the change if it is positive, and rectify the situation if it is negative.

Organizations have several phases of development, including creativity, direction, delegation, and consolidation. A company may start out with lenient rules and regulations, but as time progresses management adopts more efficient policies that hinder creative thinking. Companies mature and lose sight of their goals and mission statements, with more of an emphasis placed on individual projects or initiatives. As a business enters maturity processes, departments, and policies are refined to reunite the organization.

Ways to Conduct Business Strategy

Historically there are two ways to develop a business strategy, using the “bottom up” and “top down” models. The bottom up method is when employees generate ideas on the floor and the best results are passed onto management. The top down strategy is when business owners create the strategy and implement the changes without seeking employee feedback. Unfortunately, both models fail to include all of the employee feedback.

The new method of developing a business strategy uses a collaborative process, which is when managers and employees exchange information and work together to create a sustainable solution. It is a team-oriented process that bridges the gap that exists between managers and workers. Before you create a business strategy ensure you have the additional resources to carry out the task without interfering with normal operation. Assign tasks and delegate responsibilities while keeping to a defined chain of command.

Functional versus Operational Business Strategies

There are two types of business strategies: functional and operational. The functional strategy focuses on general ideas and a variety of tasks for different departments. The generality is a major disadvantage, however; areas of concentration include marketing, new product launches, human resources, financial assets, and legal issues. Functional strategies provide a nice overview of the business but do not tackle the important issues employees encounter day-to-day.

Operational strategies are ideal for businesses that want to reduce costs and streamline processes because it is much narrower in scope and requires accountability on all levels. The detail oriented plan encompasses everyone and everything, from the number of cashiers on duty to how much inventory is carried at a given time. A strategy is unique to each business and reflects the needs and requirements of the company’s management.

Implementing a Business Plan

A business plan is the textual version of a strategy, as it includes pertinent information regarding the company, including: vision and mission statements, measurable objectives supporting the vision, actionable tactics meeting the objective, resources, milestones and timeframes, accountability and role designations, as well as internal and external risks. The business strategy is not evergreen and should be evaluated routinely to ensure the company still has the competitive edge.

A business plan includes the primary and secondary objectives of your organization, an analysis of current policies and procedures, and the development of new policies or procedures to correct weaknesses within the organization. Before beginning a strategy, it is helpful to conduct a SWOT analysis, which helps identify weaknesses and loopholes within the organization. Your competition capitalizes on your weaknesses, thus it is essential to continuously evaluate your business.

Developing a Competitive Strategy

Brainstorming and collaboration are essential to the development of a successful business strategy. Begin the process by identifying the strengths and weaknesses of the organization. Without erasing responses, continue to identify current opportunities that help your business succeed. Finish the SWOT analysis by identifying threats or risks that place your business in danger. Identify how your company beats the competition, outlining the various strategies already in place.

Identify your current target audience and list potential audiences in the form of demographics. Assess current market conditions and how your company can defeat the competition. Reevaluate how you are reaching current and potential customers and consider your overall marketing plan. Think positively and develop solutions to overcome any weaknesses that you have discovered thus far. Admitting your weaknesses is the hardest part of drafting a business plan, as most companies want to appear strong and mighty. Research why you have these weaknesses and find realistic solutions to the problems.

Business owners often become so caught up with their work that they fail to concentrate on their business strategy, which is a significant source of cost reduction. Achieve your goals by dedicating time each month or week to address issues surrounding the operation of your business. Make the process a tradition, ensuring operations are aligned with current goals and future forecasts. Make your business stand out from the competition by utilizing different techniques to attract the most people.

A successful strategy overcomes organizational hurdles by understanding customer needs and predicting the unpredictable. The formation of a business strategy is a science that combines current circumstances with a variety of internal and external variables, addressing immediate and long-term goals of the organization. The implementation of the strategy is rolled out slowly, starting with management. The plan encompasses everyone; however, customers are indicative of the final result.

Which business strategy do you think has more potential? Leave comments and feedback below.