Cargo Business News - Current Issue


Home The Magazine Current Issue Archives Blog About CBN Subscribe Reprints Conferences Overview Southwest Intermodal Port Productivity Conference Southeast Freight Conference Port Handbooks Overview Pacific Northwest Ports Handbook Golden Gates Ports Handbook Southern California Ports Handbook Buy Handbook Newswire Subscribe Archives Calendar Classifieds Advertise General Information E-cargo Upoad Files

Create a Strategy before Cutting Costs Valerie Bonebrake, Senior VP, Global Supply Chain Services, Tompkins Associates, discusses the importance of developing a company strategy before cutting costs. By creating a model for success, companies will be able to make the cost cuts that support a healthy future. Why should a company first develop a strategy before cutting costs from its supply chain? Bonebrake: Any company in business for a long time will endure up cycles and down cycles. The current environment is more widespread than previous downturns or recessions, and economists don’t agree on when it will end, or if it will be a “U” shaped or “V” shaped recovery. Most recently, it appears we may be in for a “U,” meaning the downside will be with us longer. Companies who don’t take swift action to reduce costs are at risk; however, companies that make cuts without a strategy will be at even greater long-term risk. We believe an effective model for success consists of: • Vision: Where we are going • Mission: How we will achieve the vision • Requirements of Success: What we must do well in order to accomplish the vision • Guiding Principles: The values we practice in pursuit of the vision • Measures of Success: The key performance indicators we will measure In good times and bad, to support the vision, an organization must then have: • A Strategic plan • An Action plan (tactics) • A Budget • A Risk Mitigation Plan • Contingency Plans • Execution • Accountability We believe that cost reduction, when viewed in this light, will result in a company’s consideration of three components of cost: • Operating and Capital Costs – Traditional ongoing expenses • Talent Costs – Expenses for key resources needed to operate the business profitably • Strategic Initiatives – Investments for growth and profit improvement By considering all of these factors, a company will be more likely to get to the best decisions for the short term and the long term. Cutting without consideration of vision and strategy is just not a recipe for success. What are companies doing wrong (or not taking into consideration) when they cut costs? Bonebrake: Too often, we see across-the-board cutting, such as every department being required to cut 10 percent of its workforce. Perhaps one department should actually grow? What about the five new products in development? Maybe three of them should go, but two of them must make it to the market. At other times, we will see cuts made based on seniority or salary vs. talents needed to sustain the company long term. If cost cutting is in line with strategy, we believe leaders and managers will have a much higher likelihood of success on the other side of this recession. Does the recession mean only the strongest will survive? Bonebrake: As far as we know, there is no data to support this claim. I read recently that dreams of climbing hills and mountains usually tell of a struggle. I’m sure many CEOs are having that dream right now. They have a real battle on their hands, and there is a massive obstacle to overcome because the hill is very steep. It doesn’t feel very secure, but those who have a strategy, build in help, and don’t give up the vision of reaching the top of the mountain may not only survive but perhaps even surpass previously stronger competitors. Are supply chains evolving with the recession? Will companies need to continually update their strategy? Bonebrake: One positive thing to come out of all this is the possibility of significant innovation. Where incremental improvement may have previously been sufficient, now is the time for many to take bold action to drive transformational change. Supply chain remains a key element to success for most companies, so updating supply chain strategy to not only keep time with the business, but also drive the business, is more critical than ever. Perhaps even some traditional silos will be broken, allowing for a fresh, integrated view of supply chain performance. When should a company consider an outside consultant to help with smart cost cutting? Bonebrake: Using an outside consultant can help in several ways by: • Bringing objectivity to the task • Achieving results faster by working with employees, but bringing tools and focus to the task • A commitment to achieving results in 90-day increments n For more information visit www.tompkins.com	In This Issue News, Trends & Analysis New Items Inventory Investment and the Implications on GDP Growth Supply Chain Responding to Changes in the Supply Chain Compliance Corner: How to Utilize Technology to Manage Global Trade Compliance Overseas Opportunities for Exporters Create a Strategy before Cutting Costs Features Gateway at a Glance – Great Lakes, St. Lawrence Seaway 2009 Ro-Ro Trend Supply Chain product review Automotive Supply Chain Software Ports & infrastructure Five Major Ports, Five Different Ways to Handle the Recession Funding a National Freight Policy Commentary Will the Stimulus Package Help the Trade Conditions? Casualties Who, What, Where, When Final Say
Home/Subscribe/Our Conferences/Ports Handbooks/Advertising Info/E-Cargo/Publishing Services/About Us Contact/Classifieds/Industry Calendar/Past Issues/Upload Files All contents of this site are copyright 2008 by Northwest Publishing Center and Cargo Business News and may not be reproduced in any way without express written consent of the author. Site design by Spilled Ink Studio

Create a Strategy before Cutting Costs