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COST CUTTING

IN MANUFACTURING INDUSTRY&

SOFTWARE INDUSTRY

By

OJUS THOMAS(1020321)

VIVEK SODHI(1020338)VENU PUTTAMRAJU(1020324)

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Fixed vs. Variable Costs

Debt-service costs

Infrastructure and Systems Costs

Human Capital CostsSalaries

Benefits

Healthcare costs

Advertising and Promotional CostsOverhead and Administrative Costs

Research and Development Costs

TYPES OF COST

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Understanding Your Management Style(The devil is in the details)

Manage What You Measure

Understanding Dashboards and MetricsReading vs. Truly Understanding Reports vs. TakingCorrective Action

Getting the Right Advice

Professional AdvisorsBoard of Advisors

Coaches and Mentors

Outsourcing Services Providers

A BASIC OUTLINE IN GENERAL

COST CUTTING

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Penny-wise vs. pound foolish(Act with integrity and dont be short-sighted or cut corners itwill come back to haunt you)

Communication is critical (most vendors, lenders, etc. will workwith you if you communicate early and often)

Understanding your pain points and inefficiencies

Company capitalization (debt-to-equity ratio and borrowingcosts)

Conducting want vs. need analysis on your current expenses

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BASIC

COST CUTTING STRATEGIES

Types of Strategies

Relationship-Driven

Cost ManagementTechniques

Financial and Management-Driven


Market-Driven


Managing Vendor and Customer

Relationships

Outsourcing IT applications (ex.

Network Alliance), benefits,

sales financial management, etc. Cooperatives for purchasing,

advertising, etc. (including trade

associations)

Joint Ventures and strategic

alliances

Employee incentives and

rewards for cost-cutting

initiatives

Bootstrapping

Cash flow management

Managing employee

retention and turnovercosts

Budgeting, planning,

forecasting

Estimates and price

quotes

Corporate restructuring,

recapitalization and

reorganization

Competitive bidding and RFPs

for vendor needs

Grassroots and guerilla salesand marketing techniques

PR vs. Advertising Costs

Customer referral, retention

and loyalty systems (80/20 rule

of costs of getting new

customers)

Barter networks

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In manufacturing industry

quality do not compromise for cost.

So cost cutting depends on various other strategies ranging from

buying materials from vendors to transporting materials to retailers.

Cost cutting-Why?

Due to competition.

Peoples preference for value added products.

Who does cost cutting?

All three levels of management along with shop floor workers have

part in cost cutting.

IN MANUFACTURING INDUSTRY

COST CUTTING

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What do they do? Value engineering

Value analysis

Kaizen Process engineering

Jidoka

Reverse engineering

Waste elimination and recycling.

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When does they do it?

Continuously.( kaizen )

Where do they cut costs? In procedure

projects

inventory

Logistics

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How do they do it?

By using

VSM

Kanban Kaizen

Jidoka

By implementing practices like vendor managed inventory.

By doing value analysis and value engineering.

Out sourcing only when it exceed capacity of unit and logistics

feasibility to cut costs.

Care will also be taken while designing the products by practices like

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Design for environment.

Life cycle analysis

Credit to gate analysis and Gate to gate analysis.

For manufacturing industries SCM can not always be a solution for cost cutting.

Some time when manufacturing industries are rather project based. So, they value

more for logistics than SCM.

Important point:

Cost cutting can be done without any compromise with quality in manufacturing

industry.

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Cost cutting is not predominant in cash rich software(IT)industry. However rescission and economic down turn provokedIT companies to save something and they also looking to cutsomething from lavish spending.

Some practices of IT companies are

Reducing Reputational Risk

Reputational risk can arise from retaliatory actions taken by

current or former employees facing an uncertain job market orpredatory actions taken by competitors seeking to exploitvulnerabilities in identity infrastructure.

In software industry

Cost cutting

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When a workforce reduction or enterprise restructuring becomesnecessary, the access privileges of former employees andcontractors must be revoked so that these individuals no longerhave access to enterprise networks, applications and other

vital resources (including business partner's applications).

Enforcing IT Austerity Programs and ImprovingOperational Efficiencies

More-effective IT cost control during an enterprise austerityprogram includes the ability to match identities to resources,whether the resources are automated timesheets, or expense orfinancial accounting systems.

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Enabling Rapid Service Sourcing

Outsourcing IT services is a cost-cutting step that enterprisesfrequently take, particularly during periods of economicuncertainty.

Establish Benchmarks and Metrics

The IT organization can identify metrics that can best be used totrack progress in savings in priority areas (for example, process

fulfillment, transaction volume and time to delivery). Establishand document expected change factors, such as increase,decrease and no change, as initial indicators

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Supporting IT Alternatives

Enterprises seeking to save on IT costs inevitably, and rightly,look at alternative ways to use IT. These may include enablingmore-flexible working hours, allowing employees to work from

home, transitioning IT employees to different duties and usingtemporary staff more extensively. These alternatives need to beundertaken without incurring additional operating costs, andaccess across networks, applications and services must remainseamless and must be provided quickly if real-world savings are

to be realized.

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Meanwhile, the enterprise must maintain segregation of allemployees' duties, and transitioning will require flexibility inapproving and assigning privileges. This is achieved by anaccess control layer to mediate remote/partner-based access, and

by an identity administration and intelligence layer to deliverhigher-level process and governance capability over the identitylife cycle.

Reducing Application Development Costs

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These things are to be taken careof while practicing cost cutting.

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Addition to this cost can be cut in grass root level by

Following few practices

1. using tele / video conferencing instead for flying acrosscontinents for meetings and interviews.

2. setting up new offices and work places in well connectedSEZ and semi urban places to reduce tax and for extra benefits.

3. reduction in wide variety refreshments that have been offeredto employees.

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-Taking printouts in back to back on the A4 sheet

while giving prints

- Use Paper cups

- Turn-Off the monitor while leaving the office

- Don't keep the phone on-hold for longer time.

- Re-arrange the Transportation facility

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featherlite office systems pvt. Ltd

pdfmeta.com

google.com

Gartner systemsSpecial thanks to

Mr. Balaji

D.G.M- featherlite office systems pvt. Ltd

&

Our friends in software industry.

Bibliography and Sources:

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Documents

1020324,321,338-COST CUTTING