Four Strategies to Help Control Business Costs
Inflation is a natural part of the economy, and it can have a significant impact on businesses. As inflation increases, the cost of doing business also increases, leading to higher prices for consumers as well as potential lower margins for businesses. Although 2023 inflation is expected to be less than 2021 and 2022, costs will most likely continue to increase throughout the year. This means that businesses will continue to be faced with increased costs for materials or labor, among other things.
Here are four strategies to help compensate for inflation that has already occurred as well as for future changes in organizational operating environments.
As businesses strive to become more eco-friendly, reducing consumption has become increasingly important. Reducing use of materials, water and energy helps to not only lower your spend, but can also lower your carbon footprint and promote sustainability.
With rising energy costs, reducing energy consumption is a wise move. This can be done in a variety of ways, from installing energy-efficient lighting to setting up timers on lights and other electrical equipment. A recent blog article by my colleague shares insight on FTI’s Path to Smarter Energy, which begins with assessing your current energy usage.
Review not only how you are packaging your products but how much waste you are creating during production. Work with your suppliers to validate whether there is a better way to receive raw materials that fit with your production needs. If possible, modify your packaging to reduce the amount of material that is thrown away after your product is consumed.
Water conservation is another key factor in reducing your overall consumption. Installing low-flow toilets and faucets can drastically cut down on water usage while still providing efficient results. Additionally, utilizing rainwater harvesting systems or greywater recycling technologies can help conserve even more water over time.
Ensure Spend Visibility
Understanding where your company is spending money is critical for business health, but many organizations don’t have clear visibility where their dollars are going. With spend visibility, you have full transparency into where your money is being allocated and how much you are spending on each item or service. You also have access to real-time data so you can quickly identify areas where costs are increasing or decreasing, allowing you to make informed decisions about how best to allocate your resources.
Using spend visibility can help reduce overall costs by preventing overspending on unnecessary items or services. Having an accurate view of how much money is being spent allows companies to better prioritize their budgets, which can help them weather periods of inflation more easily by adjusting spending habits. Additionally, using spend visibility can help businesses stay competitive in the market by enabling them to focus resources on areas with the most return on investment (ROI).
Leverage Supplier Spend
For any business that is looking to maximize efficiency and reduce costs, leveraging supplier spend is an important step. By reducing the number of suppliers, businesses can save money by negotiating better prices from suppliers and finding ways to increase profits.
Leveraging supplier spend offers several key benefits for businesses of all sizes. Doing so allows you to negotiate better prices from suppliers and ensure that you are getting the materials or services you need at the best possible price. It also allows you to streamline your purchasing process, which can lead to increased efficiency and productivity.
Leveraging supplier spend allows businesses to become more competitive in their industry. By securing better prices from suppliers and finding ways to reduce costs without sacrificing quality or service levels, companies can gain an edge in the marketplace in terms of pricing and customer service which can lead to increased sales and market share over time.
Eliminate Non-Value-Added Work
Non-value-added work is any activity that adds no value to the product or service provided by your business. This type of work often involves unnecessary tasks such as sorting through paperwork, searching for information or reworking products that have already been completed. By eliminating these activities, you can reduce labor costs and increase productivity. In today’s tight hiring climate, eliminating non-value-added work is critical to helping a company run smoothly.
One of the best ways to reduce non-value-added work is focusing on process improvement initiatives such as Lean manufacturing or Six Sigma methodology. These systems allow you to identify areas where waste occurs in order to make more efficient use of resources and improve overall production quality and speed. For example, Lean manufacturing focuses on reducing inventory levels while Six Sigma helps organizations identify areas where variation exists within their processes so they can be improved upon. Implementing these strategies can help businesses identify opportunities for reduction in costs related to non-value-added activities while increasing efficiency and customer satisfaction at the same time.
Fighting inflation requires businesses of all sizes to make changes in order to ensure long-term success and profitability despite rising prices across all industries worldwide. Identifying areas where you can reduce consumption, closely monitor spending and increase productivity are ways businesses can stay competitive, leading to increased profitability despite rising inflation rates.