Many manufacturers are faced with skyrocketing costs these days. As a result, the tendency at some companies is to cut, cut, cut. But, it may not be the best strategy to follow.
Many manufacturers are faced with skyrocketing costs these days. As a result, the tendency at some companies is to cut, cut, cut.
That’s exactly what many respondents toASSEMBLY’s 13th annual State of the Profession surveyclaim is happening at their plant. Manufacturers in many different industries are scrambling to cut costs and trim their operating budgets.
While the urge to slash costs is a natural instinct for many managers when faced with uncertain business conditions, it may not be the best strategy to follow. In fact, experts at the
Boston Consulting Group(BCG, New York) urge manufacturers to be careful with their cost-cutting efforts.
Boston Consulting Group recently conducted a survey of senior executives in which more than 50 percent of respondents said a recession is unavoidable this year. They cited macro-economic indicators, in addition to a decline in sales and a slowdown in payments to their companies.
Hal Sirkin, global leader of BCG’soperations practice, believes companies should approach signs of a recession as an opportunity to prepare for when business conditions eventually improve. “By mainly focusing on cost reduction, [companies are] not taking advantage of the opportunities a recession can provide,” he points out.
Sirkin warns that it’s easy for management to fall into the recession trap. “In a recession, everyone feels short-term pain,” he explains. “But, companies that successfully approach a recession as an opportunity have the potential to realize long-term gain. Viewed the right way, a downturn presents a strategic opportunity to leapfrog the competition, rather than simply posing a threat.”
To find out more, look for the results of the State of the Profession survey in the July issue of ASSEMBLY.