Need Supplies? Ask Your Competitors.

on Thursday, August 28, 2008

It must be that a holiday weekend is approaching, because beer seems to be a hot topic this week at Source One, (see Steve Tatum’s recent post Heineken Fit 2 Fight).

While paging through Inc. Magazine, I stumbled upon a printed short piece in the September 2008 issue titled “The Great Beer Crisis of 2008”. As a beer drinker and home-brewer; I had to read the piece. Fortunately, it turned out the article was not just about beer, but was related to procurement and sourcing.

As many of you know, the beginning of this year marked a major shortage of hops (a major component of aromatic beers) due to weather related poor crop yields in foreign countries compounded with domestic farmers that have switched to more profitable crops.

Some news outlets briefly reported that major breweries would raise beer prices substantially and that small local and niche breweries may not be able to acquire product at all. On the home-brew market, we saw hop prices triple and the availability of unique and desirable hops disappear. However, the consumers only really saw a small increase in beer prices, and the shortage seemed to be short lived. How did it happen?

According to Inc, it was actually some of the largest brewing companies that helped to bail out many breweries. Boston Beer (the makers of Sam Adams) and its founder Jim Koch, as well as Ken Grossman of the Sierra Nevada brewing company jointly sold over 170,000 lbs of their company’s private reserves to help keep the industry floating.

What is so remarkable about that? Both organizations sold their hops at cost. That’s right, no markup. The demand was still greater than both companies could respond to, but some estimates indicate that their joint contribution helped bring 800 million pints of beer to the market this year.

When asked why he did it, Koch replied “I saw this as a way of reminding people that this isn’t just a business. We’re craftsmen, too, and we help each other”.

So, when prices are up, demand is high, and inventory is low; look to every imaginable source to help satisfy your supply chain needs, even if it means talking to your competitors.
Share/Bookmark

Heineken is "Fit 2 Fight"

on Wednesday, August 27, 2008

According to a recent article from MarketWatch, the Dutch brewing company Heineken experienced first-half profit gains of 35%. While some of this success has been attributed to Heineken’s involvement with Carlsberg in the joint acquisition of the British brewery Scottish & Newcastle, Heineken’s “Fit 2 Fight” cost-reduction program has also been cited as a driving force toward success. To find out more about the program, I got a hold of a copy of the actual Power Point presentation Executive Board Member Rene Hooft Graafland delivered at the 2006 Heineken N.V. Financial Markets Conference in Miami. The presentation is titled “Maintaining Momentum in Cost Reduction”.

Graafland’s presentation explains that the acceleration of top line growth, efficiency improvements, and speed of implementation are three of the four priorities for action. The fourth is the selection of acquisition opportunities. In order to identify ways to address these areas, Heineken breaks its spend out into six categories. These categories include Input Costs, Transport and Energy, Good for Resale, Marketing and Selling, Fixed Costs, and Others. Fixed and Input costs accounted for more than 60% of the company’s total spend.

The Fit 2 Fight program was designed to run from 2006 to 2008 and target 450 million Euros in fixed cost savings. The program is backed and monitored by head offices and executed by regional operations that are motivated by incentives for meeting F2F targets. Many of these targets involve the improvement of efficiency of existing breweries, increasing economies of scale of production, and decreasing losses by implementing total process management.

Heineken also focused on improving margins by reducing its sales force by 20%, rationalizing and consolidating its distribution network, and eliminating 11 of its legal entities. These measures helped to leverage volumes, improve sales force productivity, and centralize the transactional process.

The presentation also highlights Heineken’s application of the F2F program within its warehouse operations. Through warehouse management optimization and cross docking concepts, the brewery was able to significantly reduce the amount of warehouse space needed to conduct business.

Savings were also accomplished in the areas of support services through the standardization of processes, improvement of functional ownership, benchmarking, and shared service centers. The presentation describes this shift as moving from “complete is better” to “less is more”. As part of the program Heineken also implemented application hosting and outsourced network, telecom, and global workplace functions to produce a savings of well over 10 million Euros.

The Fit 2 Fight program also produced a 5% savings in 2006 by centralizing the purchase of 70% of its variable costs. The presentation points out the purchasing centralization of agricultural inputs, production materials, packaging, and labels.

Finally, the program proactively hedged the prices and quantities for bottles, cans, and malt for all of 2007. This action was taken after Heineken’s February forecast predicted an 8% rise in packaging and raw materials costs by the end of the year.

After all this, the big question is, “Was it worth it?” Was it worth all the research, planning, execution, and implementation? With permanently improved processes, cost savings, and a 35% gain in first-half 2008 profits, Heineken’s managers can happily answer this question with a resounding “Yes.”
Share/Bookmark

When and Where of Petro-economics

on Monday, August 25, 2008

Absent serious contractual considerations, the time to source a requirement is now. The visible and even less visible impact of petro-economics is showing itself in higher unit costs and shrinking bottom lines. Thus, it is easy to shift focus to materials whose prices are driven by petro-economics regardless of their position in the supply chain. This “squeaky wheel” approach often drives un-empowered, adversarial price negotiations, worst of all, in a seller’s market. It behooves procurement teams to better prepare for the impact of commodity driven price movements by arming themselves with better understanding of two key components of cost. Product knowledge and market knowledge can go a long way in assisting procurement to structure empowered, balanced and effective negotiations regardless of market conditions. Further, detailed product and market knowledge can eliminate renegotiation by setting established price markers for ongoing purchases.

Bear in mind, though, that the leg work, the establishment of a complete and sophisticated baseline is challenging enough with plenty of time and sufficient resources. Working to establish sophisticated baselines under the pressure of a reactive environment almost certainly foretells a less than satisfactory job and disappointing results. Because price movements from market based crude vary from market place to market place (e.g., Canada, Venezuela, Persian Gulf) , and the effect of crude price movements on fuels and finished goods is non-linear, establishing a baseline can be complex and time consuming. The moral to the story is that if one is trying to build a successful negotiation in response to an upward market, it’s already too late to ease the pain of the impending price wave. As in all sourcing events, the construction of a detailed baseline and assembly of relevant market intelligence is best executed well in advance of actual price negotiations.

It’s the “where” of petro-economics that can extend a baseline in several directions. One common misconception is that America is overwhelmingly dependant on Persian Gulf oil supply. One might be led then, to chase Persian Gulf indices as a pricing barometer. In fact, though the US produces 40% of the oil it consumes, and imports the remaining 60%, 17% of which is supplied by non-Persian Gulf resources. Thus the use of Persian price movements as an index for change is a poor measure. The use of a relevant price index is critical to managing costs, and establishes a position of knowledge and empowerment with suppliers.

At the same time, the “where” of petro-economics takes shape as a component of cost in finished good pricing as well. Specifically, understanding where in the material and distribution chains that petro-economics have their impact. For instance, a purchase as simple as stretch wrap is affected in the raw material, production, storage and distribution chains. Even the non-descript ball point pen is touched in the same way. Almost every finished good suffers the impact of plant and distribution economics driven by oil, the comparative economics of natural gas, or electricity fueled by oil or natural gas. So the reach of petro-economics extends to many, or in some cases all, of the links in the supply chain.

In our next piece, we will address the why and how of petro-economics. Specifically, why we should construct sophisticated baselines and how to do so.
Share/Bookmark

Say Hi to Wi-Fi in the Sky

on Friday, August 22, 2008

Flights will never be the same. They are not a refuge anymore, no longer a mini escape from the hustle and bustle of reality. If you have a wireless device and a fully charged battery then you are now able to surf away, but of course you'll have to pay. A Wall Street Journal article titled "The Latest Hot Spot Is on the Plane" was released a few weeks ago and reported that Delta Air Lines will soon be offering Internet access on its flights. American Airlines has already begun to offer the product on a select few planes. Passengers will be able to upload and download files, surf the Web, e-mail clients – basically perform every function normally done in the office, except talk over the phone. Relatively soon, other airlines are going to jump on the bandwagon. Many are still in the midst of testing their equipment to ensure a smooth transition.

The greatest benefit of this new development will not be for those who purchase the product on flights, but rather for the airlines offering the new technology. I do not doubt a demand for Wi-Fi will exist, but there will also be a handful of fliers who will refuse to pay for something that is usually offered for free in coffee shops and even some airports. Once having paid, there may even be a benefit to fliers besides staying connected. If Wi-Fi becomes a hot commodity, airlines may begin to remove the nonsense fees they have recently begun to place on their customers. Airlines could receive a significant amount of cash generated from this new product. Have a look at the article for more pricing details.

As airlines explore more opportunities to stimulate cash flow, they should also consider taking a look at what upsets their customers the most – lost luggage. Looking for ways to eliminate costs and also please customers is an opportunity that should be seized. Some airlines have made changes to their handling process and have been more than satisfied with the results. Take a look at WSJ’s article, "The Airlines' Bag Reflex," for a more in-depth overview. The article states that it costs an airline approximately $90 to return a lost bag to its proper owner. This $90 eventually turns into about $4 billion a year for the global airline industry. Wow. It would of course take some extra money to look for a more efficient process to handle bags; and it is understandable that airlines may not have the budget for such a drastic change considering the economic trends.

If this is the case, however, then how are airlines affording the installments of Wi-Fi in their planes? Because there will be immediate results in the form of revenue that would cover the cost of investment. If the economic conditions were different, maybe airlines would become more focused on the long run and fix their luggage problems. They would save a decent amount of cash and retain more customers; but that is not likely to happen anytime soon. If I had it my way, I would rather say hello to my bag at the terminal than to the Internet in the sky.
Share/Bookmark

Source One Sponsors Procurement Insights

on Thursday, August 21, 2008

Source One and The Strategic Sourceror have recently started a sponsorship of the Procurement Insights Blog.

For those of you not familiar with Procurement Insights, they have a rapidly growing community of subscribers (300,000+) and publish their blog in multiple languages. Though posts are not as frequent as sites such as Strategic Sourceror, Spend Matters, or Sourcing Innovation, the topics covered are just as robust, often with detailed reviews or summaries of seminars, presentations and white papers.
Share/Bookmark

The Other Side of the Coin

on Wednesday, August 20, 2008

Last week in "Who's Minding the Hen House" (http://www.strategicsourceror.com/2008/08/whos-minding-hen-house.html), we looked at objectivity in the sourcing and supplier selection process. While there are people that act in their own best interest vs their company, there are also people that work to capture every cent of available savings for their company.

Consider the following email sent by one of our clients' purchasing managers to two of their plant locations (edited for privacy reasons only):

Within the past two weeks, purchase orders were placed with Supplier A and Supplier B. Based on our corporate discount level, we anticipate that our company lost $333.97
in savings at Plant A and $394.76 at Plant B.

The selection of our primary supplier went through a formal strategic sourcing process and was approved by our sourcing and management team. Please make sure that lubes and greases are being ordered from our approved supplier, unless there is significant justification as to why we could not purchase these items from them.

If you have any questions, please contact me. Thank you for your cooperation and assistance.
This email was copied to several executives including the company CEO. Needless to say, the two locations "got the message" and contract compliance is running near 100%. The purchasing manager should be commended for taking an unpopular stance for the benefit of his company. He could have just looked the other way.
Do I need to say more?
Share/Bookmark

Who, What, When, Where, and Why of Petro Economics

on Monday, August 18, 2008

Perhaps no other commodity trickles further down (pardon the pun) the supply chain than petroleum. As a result, identifying the impact of petro-economics on the supply chain extends from the as far upstream as direct materials to as far downstream as shipping costs. In order to identify the “who” in your firm’s petro-economic equation, it is necessary to determine the “what”.

Specifically, what products in your supply chain are either made from of transported using petroleum? Even a cursory analysis of purchased goods will quickly reveal that a plurality of your procurement, if not a majority, is touched by petro-economics.

The degree to which fossil fuels color the horizon of a firm’s spend can be eye-opening, however. It’s simple enough for a chemical toll blender to point to the effects of rising oil costs as a driver for COGS pricing. Additionally, the shift in Natural gas prices that results from comparative economics throws a blanket over direct material prices. Yet the impact of petroleum prices stretches as far as the packing peanuts in a box of laboratory glass, the stretch wrap around a pallet of copy paper, or the cost to deliver an overnight letter.

Consider that all the way downstream, at the foot of the supply chain delta, lies a box of office supplies. The delivered price of those items is likely affected by material costs driven by petroleum prices, packaging costs driven by petroleum prices, shipping costs driven by petroleum prices and the like. So, while the invoice may say Staples or Corporate Express, the check you cut is also paying ExxonMobil, BP and all the rest.

What’s meaningful to consider is not just that the Oil Barons are also your supplier for even the most tactical purchase, but how much those oil price movements can affect the cost of delivered goods. One needs only to do the simple math of the affect of a fuel surcharge on an overnight letter to understand just how much fuel cost can drive tactical purchases. Further still, the economic impact of globalization on integrated supply chains that once drove prices downward is now driving them upward. Oil that sold for $10 a barrel a decade ago, when integration was in its nascence, now sells for $115. To better understand the impact of oil costs on international shipping, a 40 foot container moving from Shanghai to the US cost about $3,000 in circa 2000, now costs around $8,000, a 167% increase (WSJ, Aug2008). As a result, cheap goods such as fasteners, textiles, and other foreign goods with favorable labor economics are suddenly losing their price advantage. Consider also that overseas freighters are also slowing top speeds by 20% to conserve fuel. Delivery times are stretching as a result.

Nonetheless, the degree to which a firm can exercise agility in its supply base is often tempered by the impact of consumer trends. The de- integration now necessary for low cost supply is not usually an option for the downstream customer. So what is a buyer to do?

In our next piece, we’ll discuss how to approach petroleum pricing both in negotiations with direct suppliers and by teaming with indirect suppliers.
Share/Bookmark

Who's Minding the Hen House?

on Thursday, August 14, 2008

Are there savings available to your company that you are not getting? Are you using best practices in strategic sourcing? Who selects your suppliers? Who awards the contract? Are these decisions made objectively? Is the price that you are paying the best price available for the required service levels? How do you know?

Periodically we find that suppliers have offerings that can benefit an organization, but they are overlooked because they are detrimental to the individual that is responsible for the spend. Suppliers are smart. During the year, there are tickets to sports events, lunches, dinners, trips, conferences and other benefits of the supply relationship that go to the individual and not the company. These benefits are often considered to be relevant to "building the relationship".

We have seen extreme cases of supplier preference, often while hearing what a great job the supplier is doing. One case involved a large telecommunications contract. The internal team at the client that "owned" the spend was the network support group. At the start of the sourcing project the "team" cited their rationale for staying with the incumbent supplier. It was a long standing relationship in which the incumbent had done a great job. There was a cost of change etc etc.

Noting all of their specifications, needed service levels, requirements and concerns, we executed on the agreed to sourcing strategy. What were the results?

An alternate tier 1 supplier proposed a completely managed solution that yielded almost $1 million in hard dollar savings. Since it was a managed solution, the network support group could eliminate 3 people from their team further increasing the savings for the company. What was the reaction of the network support group when we showed them our findings?

"You get what you pay for"! "Where did you find this deal"! "There must be something wrong"! We heard all the reasons why not. No one even wanted to explore the supplier's offering in detail.

Needless to say, we took our findings to our executive sponsor who was very interested in the potential savings. After considerable political effort and overcoming all of the objections from the network support group (some bordered on the ridiculous), the executive team agreed to the change in suppliers. The new network is up and running and the client is benefiting from a better solution at a lower cost.

Much the same way that Batman has to struggle with moral dilemmas, many corporate "Dark Knights" have to make decisions that are for the greater good (the company) even to their own personal detriment. Many times, executive management is in the dark when it comes to evaluating and benchmarking their costs. Procurement Service Providers can provide a cost effective and objective "look" at operational spend. They can spot the wolves and help you to drive savings even when people are telling you about the great relationships, value and service that you are getting. When a supplier has something to offer outside of the commercial relationship, we tell them to "put it in the price". This helps to eliminate some of the subjective decision making it easier to compare offers across suppliers.
Share/Bookmark

Follow up, iPhone as Alternative to BlackBerry.

on


Several weeks ago, I blogged a short piece discussing some of the alternates to BlackBerry devices that IT managers and Procurement departments could consider in supporting their organizations.

Since that blog post, Apple has released the latest version of the iPhone (3G), and with it, they are now supporting push email with Exchange (similar to windows mobile’s built in functions). Gartner has recently taken a fresh look at the new device, and has some reservations about deploying it in a corporate environment.

Overall, the iPhone has made major improvements by adding security features (the ability to wipe a phone clean from remote locations) as well as support for Exchange push. However, in order to manage the phones, iTunes must be installed on each user’s pc, which by default circumvents many of the security policies and controls that IT departments can place on devices. There was also a blown launch of the MobileMe service (which enables Exchange push email), and wide reports of failures, lost emails, and large delays in receiving email. Additionally, the iPhone is not capable of editing office documents (word and excel) while both BlackBerry and Windows Mobile support it, excessive costs from AT&T for data plans, and poor battery life while using the data component, an argument not to switch to the iPhone on a corporate level could be easily made.

Now don’t get me wrong, the iPhone is perhaps the most user friendly portable device on the planet, and it potential has barely been tapped. However it just does not seem like a enterprise device at this time, especially if costs are a major concern for your organization. Now, if you are a small business, or really only need the phone to check your email, it might be a solution for your company, but don’t expect your IT departments to be able to deliver the level of support and security that you are accustomed to with Blackberry or WinMo.
Share/Bookmark

Don't stop to catch your breath because of lower oil prices.

on Thursday, August 7, 2008

With gas prices plummeting recently to just under $4 per gallon, and forecasts of oil price drops to as low as the once historic $100 per barrel, it would be human nature to breathe a sigh of relief. It’s not unthinkable, in light of the effects of 07-08’s market “correction”, to accept the “new normal” of petroleum pricing and establish a “storm has passed” mentality. It’s a fact of necessity that most consumers, especially those at the pump stand, will do just that. After all, if $4 gas is terrible, the $3.25 we saw as an abomination just a year ago seems not so bad. But if we’ve learned anything, and that’s open for discussion, from the recent effects of petro-economics on our wallets, it’s that the market for oil and its many uses is painfully dynamic.

Yet the automotive gasoline buyer feels the sting of petro-economics in a concentrated, short burst. Each trip to the pump stings a bit. The monthly budget, for those of us who have one, takes a more appreciable hit. But these economics pale in comparison to the brute force effects of petroleum prices on manufactured goods such as plastics and rubber, freight costs for overland/overseas shipments, and petroleum and natural gas based chemicals. The basic truth is though; that the head of a family is not being held accountable to stakeholders and shareholders like a CEO is held accountable. At least for the meantime anyway, 8 year old Jenny won’t be calling Dad in to give him a golden parachute because the Q1 and Q2 2008 dividends have been well below “the Street’s” projections. For those of us who place the orders for goods and services whose prices have spiraled in the last year, however, that CEO level accountability rolls swiftly downhill.

So while there appears to be a break in the madness, or at least a respite, now is not the time to be catching one’s breath. The dangers of merely riding the petroleum wave are evident in this most recent crunch, the last crunch and the crunch before that one. Each market movement does create a “new normal”. That new normal creates either the harsh reality of passing on the sting of higher costs, or the opportunity to use tools and metrics to one’s competitive advantage. The willingness to embrace the opportunist mindset is the linchpin in turning the punishing effects of market movements into competitive advantage. After all, it’s unlikely that any competitor has found a method whereby they can avoid the effects petro-economics. Thus, those who can pare out the greatest percentage of those painful changes are likely to be the benefactors.

It’s difficult to imagine a commodity that has a deeper, more widespread effect than petroleum. Because it affects the supply chain as far upstream as the production of raw materials and as far downstream as the packaging and distribution of finished goods, it’s a challenge to imagine any business that has not or will not be affected by market movements. That’s why market dynamics present and opportunity, writ large, for almost every company to affect its bottom line by managing the effects of petro-economics now.
For next time, we will delve into the who, what, when, where, why and how of petro-economics and how the forward thinking procurement team can better identify, isolate and manage these effects to your company’s advantage. Whether petroleum affects your bottom line at the foot of the river or at the mouth of the delta, it’s sure to be beneficial.

This Post will be continued…
Share/Bookmark

There is Hope for the Future

on Tuesday, August 5, 2008

Tired of the news about oil, the economy and the war? Many people find it depressing. There is hope however. Some people are taking action.

People like Peter G. Peterson (http://www.pgpf.org/about/leadership/pgp/). He has committed $1 billion of his wealth to tackling the problems of America. Namely the deficit. On August 22, a movie, I.O.U.S.A. ( watch the trailer: http://www.iousathemovie.com/), funded by Peterson's foundation will open in 10 big cities around the country. Reuters said "I.O.U.S.A." "may be to the U.S. economy what 'An Inconvenient Truth' was to the environment."

The Peterson foundation estimates the national debt to be $53 trillion. That's right trillion! Your share is $175,000 and growing. The numbers are large. To put them in perspective, the foundation has created an easy to understand guide about the government's financial condition. You can download a PDF: http://www.pgpf.org/ of the State of the Union's finances. The guide provides actions that each individual can take to help get our countries finances under control.

Like Peterson, you can take action to get your company's finances under control. At Source One (http://www.sourceoneinc.com/), we are able to benchmark your cost verses your peers and competitors. We can help you to optimize savings and be more competitive. Don't run from crisis to crisis scrambling like the government did with the tax rebate and housing bailout bill. You can sustain profitability......by taking action!
Share/Bookmark

The Wheel of Fortune

on

Do you ever find yourself watching the game show “Wheel of Fortune” and feeling bad for a contestant when they spin the wheel and land on bankrupt? You hear the sound effects and along with the audience watching, you let out a big “awwwww” and then hope the player bounces back. If this image is familiar to you, then imagine the contestant behind the wheel as S&A Restaurant Corp., the owner of Bennigan’s. Now your feelings might have changed a bit. The corporation filed for Chapter 7 bankruptcy a week ago and in doing so, left all of their franchisees in the dust.

It is a bit different when corporations go bankrupt. Unlike the “Wheel of Fortune” contestant, S&A has no desire to get back into the game. But then again, the company has much more to lose than the contestant. Therefore, Bennigan’s franchisees are left to fend for themselves. Most of the franchisees remain and they face several challenges. One of them is being able to retain customers despite the image their franchisor has received from the media. A second hurdle lies in the possibility of facing an increase in costs from suppliers. Suppliers may raise their prices because they have lost business due to Bennigan’s closing their corporate restaurants. BusinessWeek has an informative article online titled "After a Franchisor Files for Bankruptcy" which discusses Bennigan’s bankruptcy more in depth.

As consumers tend to shift more towards the cheaper alternative, fast-food chains, restaurant chains are going to start to feel increased cost pressure. One of the reasons why Bennigan’s shut down is due to its lack of differentiation from similar restaurants such as Applebee's. I cannot offer a solution at this time for those restaurants currently struggling but I can cheer for them as they try to solve the puzzle.
Share/Bookmark

Brown-Baggin’ It

on Monday, August 4, 2008

As the economy changes from day to day, it is obvious that different companies benefit at different times. For those companies who manufacture lunch bags and coolers, sales have increased significantly compared to last year at this time. The reason: many people are cutting back in every aspect of their daily lives. The aftereffect: bagged lunches. Individuals realize that by packing their own lunch they save a considerable amount of money each week. Some employees are even lucky enough to receive lunch in the form of a benefit.

In a Wall Street Journal article titled “Bagging Lunch: The Inflation Effect”, some employers are offering their employees something to chew on – a free lunch. One company offers its employees five dollars a day in the form of food credit. This strategy has decreased turnover. The argument behind it is the fact that it costs less to pay for employees’ lunches than it does to hire and train new employees. Those companies that do not need to implement layoffs are showing great efforts to retain their employees. It may be a bit of a stretch, but simple strategies such as food, could determine whether a person remains with a company. In my opinion, food is a great incentive. This is also coming from someone who enjoys baking only for the sole reason of inhaling what they bake. Also, companies who purchase lunch for their employees have seen more than just quantitative results. Relationships have formed over lunch and morale is higher.

However, be careful. A newly established lunch plan for employees may actually contradict the suggestions mentioned in my previous blog, “Shedding some pounds – and costs too!” If you wish to offer free lunch to employees, make certain that the lunch is healthy. Yes, splurging is allowed from time to time, but if the two strategies discussed are implemented simultaneously and done so in a careless manner, overall they may be ineffective and create zero results.
Share/Bookmark

Shedding some pounds – and costs too!

on Friday, August 1, 2008

During these tough economic times, some companies that operate as conglomerates and are held responsible for several divisions are feeling a sense of urgency due to their company’s complexity. Ironically, two companies who find themselves in this type of predicament are contradicting their own corporate name. General Motors wishes it was more focused and General Electric is planning to become more focused – so much for being “general.”

General Electric is performing many changes to its infrastructure in order to simplify its operations and create more cash flow. Many analysts have questioned CEO Immelt’s capability of managing GE’s vast portfolio. He assures all critics that the company is in reliable hands. GE’s appliances’ division has experienced a decline in sales due to the current state of the economy. Therefore, the company has considered the option of selling it along with a few of its other divisions in order to remain profitable.

General Motors is in a much bigger pickle. GM, having approximately seventy models throughout its eight brands, may be wishing it had kept its strategy simple. GM needs to shrink tremendously. If the company wants to remain competitive, drastic measures need to be taken. Bankruptcy protection may be the only way out of this one. One of the leading causes of its plummet is the decline in truck and SUV sales.

When looking to save money and cut costs, these two companies are doing so by eliminating product divisions and implementing layoffs. Several other companies have adopted the same strategies. When smaller, privately-owned companies are feeling the pinch, they do not normally have the option to retire a product line or service. Therefore, they seek to reduce costs elsewhere. Some strategies are often related to fleet management as discussed in several postings and other methods are relevant towards health-care and energy.

Many small companies are taking the healthy approach to save money. Wellness programs have been put into practice to lower heath insurance claims for companies. In an article on SmartMoney’s Small Business site titled “Companies Win Savings As Workers Lose Pounds”, a few companies discuss the lengths they went to generate savings by improving their employees’ lifestyles. Contests were the most popular method used to get programs underway. Teams were formed, goals were met, and savings were visible. Yes, an investment of time and money went into these programs, but the results were rewarding. Morale increased and money was saved in the long run.

Even if the time and energy is not available to implement a legitimate program, a contest to see who can shed the most weight or run the fastest mile can stimulate some healthy competition within any company, big or small. With the opening ceremony of the 2008 Beijing Olympics only a week away, there has never been a more perfect time to motivate employees.
Share/Bookmark