How are you cutting costs?

trim-the-fat-words-on-scale-cut-costs-budgetThe “cheap and cheerful” cost cutting train has left the station and it is not coming back anytime soon. I firmly believe that companies and organizations that think an outsource provider can provide easy cost cutting measures are standing at the wrong train platform. Unfortunately, there are too many people standing at this platform speaking at conferences touting inexpensive and simple fixes. I don’t believe them.

There are absolutely ways to cut costs. There are absolutely service providers who can and will deliver on those measures. Today, cutting costs is so much more than shaving a little off of the price the customer pays for something though. It is no longer easy (maybe it never was easy) and it is not a one-way street. It takes some ingenuity and effort from the buyer and the provider to deliver savings.

Highly collaborative relationships cut costs but use a very different approach than most.

Buyers can unlock value for their organization by decreasing both their companies’ and vendors’ exposure to risk. For example, a food manufacturer unlocked value by partnering with their trucking vendor to mitigate the risk of fluctuating fuel costs. The companies agreed that the cost of fuel would be passed through to the company. At first that seems like a risky decision, but the vendor had a contractual incentive to be more fuel efficient, which they did by operating their trucks at lower speeds, idling less frequently for shorter periods of time, and using routing software. In the end, the risk of fluctuating fuel costs were mitigated, decreasing risk to both companies and lowering costs to the food manufacturer.

Costs were cut–just not in the traditional way. I believe that to truly cut costs, you’ll have to get creative, work with your partner and look through a different lens. But, it can be done. It has been done.