Saturday, October 30, 2010

How effective are cost reduction strategies

most companies treat cost management as a one-off exercise driven by the need to manage short-term profit targets, while some of these exercises do succeed in the short term because of constant pressure from senior management, hasty cost-cutting typically goes into reverse once the pressure is removed and rarely leads to sustainable changes in costs. According to this McKinsey report, one-off cost cutting changes neither long-term process nor does it influence the way internal capabilities develop around opportunities.

A better approach is to focus on building competency in cost management rather than cost reduction. Cost management programmes tend to be more longer term but also, crucially, offer more flexibility in dealing with changing business conditions, for instance, by allowing faster response times demand level shifts and better influencing their competitive drivers.


Tuesday, October 5, 2010

Down Turn Brings Procurement In Front

Procurement divisions can do more to lead strategic initiatives that enhance value and reduce cost according to top management.
That’s the finding of Capgemini Consulting’s 2010 Global Chief Procurement Officer (CPO) Survey released today.
Almost 80 percent of professionals say top management expects them to improve the overall value contribution of the Procurement function.
Based on responses from over 150 global companies across Europe, Asia and the Americas, the survey reveals there is a clear and emerging focus on strategic initiatives that can enhance the value delivered by procurement.
These strategies include proactive value creation through innovation; contribution to corporate sustainability objectives; developing reciprocity agreements with suppliers; increasing speed to market and a focus on Total Cost of Ownership.
Cost reduction continues to be a major focus area with over 40 percent of respondents reporting savings targets at nearly 10 percent for 2010.
Strategies that Procurement executives are employing to achieve these targets include contract re-negotiation, tighter contract compliance, global sourcing, hedging and moving to outsourced procurement services.
There is a continued trend towards centralised procurement operating models with over 40 percent of the surveyed companies favouring this model and another 50 percent favouring a centre-led/hybrid model.


Monday, October 4, 2010

Manufacturing Challenges In India

he world today sees India’s economy growing into what’s expected  to be one of the biggest global economies by mid-century. Although India is still viewed by manufacturers as an economy where the risks are higher and the business environment more problematic than other rival Asian countries, India does offer some advantages for investors/manufacturers. Analysts say that the legal framework in India that protects investment is one of the best in Asia. The country also offers an abundance of  technical and managerial talent. The demand for electronics hardware is increasing at a rapid pace and is estimated to reach US$ 400 billion by 2020. At the same time, the gap between the demand and local manufacturing will widen and can reach US$ 300 billion, if the necessary measures are not taken on time. The major sectors driving the growth of local electronics manufacturing are telecom, consumer electronics, automobiles, defence, medical electronics, and the EMS industry, the last of which is expected to grow at a CAGR of 9 percent over the next five years.

The burden of licensing and involvement of the bureaucracy has significantly reduced in India, since 2000. In terms of the companies’ perception of the burden, India is rated better than China and Brazil on business regulation. Licensing is no more a requirement in India, after liberalisation. Only in few areas of manufacturing or services is licensing applicable, as in the case of 3G services, etc ------

India’s commercial taxation system is unusually complex, especially where indirect taxes are concerned. While income tax, excise and customs duty are set by the Central Government, states and municipalities also levy their own taxes and provide discretionary exemptions to attract investment. Although the tax policy and many tax rates are set by the Centre, states and municipalities also levy their own taxes, which can overlap with state taxes. A manufacturer has no option but to take professional assistance to understand the tax structure.-------

Weak infrastructure remains a significant cost factor for companies, although most infrastructure indicators are showing an improvement. For the efficient running of any industry, good infrastructure is of prime importance. Infrastructure helps in improving efficiency, quality, cost, and service. The basic infrastructure for any industry comprises good roads, power, water, telecommunications, finance, raw materials, components, and logistics. In India, availability of these facilities is not upto the mark even in established industrial estates.------

 Complete  story on

Sunday, October 3, 2010

Indian Quality Revolution - A Report

In the last decade, Indian manufacturing companies have imbibed world-class practices in manufacturing management. They are today being rated among the best
At the end of the first decade of the 21st century, Indian manufacturing companies are at par with the best in the world from a quality perspective. The next step will be to gain scale.

India has the largest number of companies, outside of Japan, that have beenrecognised for excellence in quality. Twenty-one companies have received the Deming Excellence award and 153 companies have bagged the TPM Excellence award for their total productivity management practices from Japan Institute of Plant Maintenance (JIPM). As many as 165 companies have been recognised for the Confederation of Indian Industry (CII)-Exim Bank award for business excellence (equivalent to European Foundation for Quality Management awards); about 80 per cent of these are manufacturing companies. Sundaram-Clayton, Sundaram Brakes Linings, TVS Motors, Brakes India, Sona Koyo and Indo-Gulf Fertilisers are among the few Indian companies that have won both the Deming and TPM awards.
This has happened because in the last decade Indian manufacturing companies have imbibed world-class practices in manufacturing management by educating their employees, both managers and shop-floor staff with the help of global teachers who have brought in the best manufacturing management techniques. These practices have shown positive results in bringing down customer returns to below 50 parts per million (ppm), and have reduced manufacturing costs by 15-20 per cent over the decade.
Sundaram Clayton of the TVS group became the first company to get the Deming prize in 1998, after having put in 10 years of significant efforts to imbibe the total quality management (TQM) culture. The TVS group found a lot of commonalties between its culture and the one prescribed by TQM — and its companies became fully aligned to bring about “continuous improvement” into their fold. Many Deming Award winners are from the automotive and automobile component sectors, with Tata Steel being the most recent claimant in 2008. Tata Motors, among many others, is pursuing the Deming awards

Related Posts with Thumbnails