Email
sinha.rk.dr@gmail.com
Cost focus can be detrimental to your business profits.
Many companies resort to too much focus on cost, thinking that it would lead to higher profits, which continues to be an elusive target for them. We should clearly differentiate between good and bad cost cutting initiatives.
There are many cost cutting initiatives which adversely affect the smooth flow of products, e.g. cutting down on strategic inventory, taking longer production runs, buying large quantities from vendors at a discount. Such initiatives adversely affect the profits of the business as they bring down the key capabilities of flexibility and fast response to demand changes.
Cost cutting initiatives which improve flow simultaneously are, of course, welcome. These could include synchronizing supplies with demand, minimizing quality variations, improving reliability of machines, etc.
We should keep a sharp focus on flow improvement and benefit from any cost reduction that comes our way in doing that.