Cost Reduction Strategies in Difficult Times



ISM's 87th Annual International Supply Management Conference

San Francisco, CA
May 2002

Author(s):

Roberta J. Duffy

Brian G. Long, Ph.D., C.P.M.
President
Marketing and Management Institute

Jeffrey P. Wincel, MBA
Founder and Principal of Lean Supply Chain Forum

Brenda Bunch, C.P.M.
Commodity Manager
Phelps Dodge Mining Company

Lisa M. Ellram, Ph.D., C.P.M., A.P.P., CMA
Professor, Arizona State University

As presenter Jeffrey Wincel put it, "It seemed obvious by the title of this session, that the topic would be about functioning within a depressed economy, but depending on the industry, it may always be a difficult time, due to slow growth, cost reduction pressures, or limited opportunities for new business."

This Sunday afternoon session focused on strategies that are commonly deployed during "difficult" times. One major consideration is the balance that companies must achieve between short-term solutions that will seek them through the difficult times and long-term strategies that must be employed for ongoing success.

Wincel discussed Kaizen (small, incremental) theories and Kakaku (large, radical) theories that can be used. Kaizen might include price benchmarking, and short-term process improvements, while Kakaku may mean value analysis or value engineering and lean manufacturing.

Interesting, when a mixture of both short- and long-term tactics are implemented, savings trends are greater early on and over a five year period than they would be if just one or the other were used. See the graphs included in Wincel's presentation slides.

By Roberta J. Duffy, editor of Inside Supply Management

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