Frank Burkitt, a principal of Deloitte Consulting LLP believes that shrinking margins that accompany an economic downturn globally just aggravate the present situation. Executives need to use top-down revenue cutting and bottom-up cost cutting approaches.
According to Frank Burkitt, cost reduction so rapidly accomplished by many companies is a big fault. It can hurt supply chain. The idea of cutting revenue in a downturn might seem crazy, but simply put, some customers are not worth serving and some products are not worth selling.
To make smart cuts to your supply chain, you should first understand which elements represent the core of your business,” says Burkitt. “Which customers are the most profitable and which are expendable? Which products do customers truly care about and which are just window dressing? What level of service quality do key customers need and expect?
Ironically, the best way to start cutting costs may be to start cutting revenue — specifically the ‘bad’ revenue that undermines profitability. Decide which revenue streams are not worth preserving and then target cost reductions.
L.D.