Identifying 'soft dollars' is key to successful cost-cutting exercise

In even the best-run companies, it can be surprising how efforts to cut costs often overlook those areas where greater total savings and new efficiencies may be found with a little more perseverance.

During the downturn, many organisations were quick to freeze salaries and impose executive travel bans, which translate into noticeable savings. However, while taking these and other similar measures, plenty of companies will also have continued to pay substantial sums for such things as underused warehouse space, their own fleet of delivery trucks, suboptimal shipping services and high storage charges for slow moving inventory.

'Many people overlook the 'soft dollars' when they are doing a cost-cutting exercise,' said Joseph Phi, the chairman of GSI Hong Kong, and president and executive director of Integrated Distribution Services (IDS) Group.

In his analogy, the 'soft dollars' represents the areas of a company's operations where it is possible to find efficiencies, reduce expenditure and become more competitive. In many cases, the best place to start looking for such improvements is still in the logistics arrangements.

Despite the advances during the past decade in terms of technology and cargo tracking, companies continue to miss opportunities to streamline their supply chains. There are still ways to strip out costs which, in the final analysis, are simply unnecessary.

The key is to plan more carefully, minimise the 'touch points', borrow best practices from other sectors, and pay only for what you need. By doing that, it is possible to pare expenditure along the supply chain from sourcing and production through to shipping and distribution. The cumulative savings can be considerable.