[Management Column Vol. 36] Reasons Why Cost Reduction is Not Progressing

basic information

Please use this as hints for management decisions, such as building a management foundation, improving management quality, cash flow management, bank relations, business succession, and restructuring after the appointment of the second or third generation. Also, feel free to contact us with any questions or inquiries when putting this into practice.

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Applications/Examples of results

I often encounter cases where cost reduction is not progressing well. Analyzing the phenomenon reveals that it can be categorized into the following four cases: 1. Cases where there is no system to properly evaluate cost reduction - Efforts are not recognized - Only continuing the same initiatives as the previous year without taking on new challenges 2. Cases where the procurement system and infrastructure are not well established - The same items are purchased by multiple departments, or transactions with the same vendor are conducted through multiple points of contact - The procurement department and the user departments are different, leading to a lack of a sense of ownership 3. Cases where the skills and know-how for estimation and negotiation vary by individual - Information regarding market prices is not collected or accumulated, resulting in a lack of judgment on price appropriateness - There is no negotiation know-how with vendors, leading to prices and contracts dictated by the vendors 4. Cases where the management process is not well established - Payments continue without reviewing purchase prices - Existing vendors become fixed for long periods, resulting in a "mutually dependent relationship" How was that? Cost reduction is management that directly impacts profits. If any of these apply, let's improve it immediately! Next time, I will share the definition of "strategy" in management.