When the economy is not doing well or when a company is not doing well, there is tremendous pressure to reduce costs.

The accountants are normally the worst persons to come up with suggestions to reduce costs. They will find simple, stupid costs and act like they have done something great. The normal suggestions are:

– travel by train, not air

– serve tea/ coffee only once in a day

– cut down/ reduce staff welfare

– switch off the a/c, fan, lights

etc. etc ….

Now all of these are good suggestions no doubt, but will it really matter in a huge organisation? No it will not. The accountant will make a big excel sheet presentation called ‘impact analysis’ and hours will be spent on analysing the impact.In one such meeting in a big company with multiple plants….as usual one of the accountants said ‘let us close plant A’ -this is a high cost plant….

The GM in charge of production said ‘Vow what a suggestion, let us close ALL the plants, all the costs will be saved’ – and there was laughter all around!

This post however is not about cost reduction it is about our regulators…

The regulator should do the following:

– dramatically improve penetration of the END product which he is regulating

– dramatically reduce costs while improving the service

I see only TRAI having done that. I keep wondering whether the other regulators believe that by reducing / ELIMINATING the industry they can eliminate the complaints?

‘shut down all plants to save all costs’ can also be translated to ‘close down all the players in the industry so that there are no complaints’???? just asking!!

 

 

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  1. Witha SAD Exit of Fidelity ,this truth straight comes on table.Worlds No 1 MF Manager ,leaving worlds consumption lead economy ,where demat accounts are just 8 Million ( Huge Untapped ,growing Market)…so SAD .

    Regulators may still say….IF You dont have FIL,go to others…If you dont have Bread or Chapati in Indian context,well EAT CAKE !

  2. Sir,

    I have a different view point here. Cost reduction is not over night process. It is Continous Improvement Process. In recession, companies gather all brilliant ideas to save cost. The moment we get to know we are out of recession, we throw away all those ideas. This is bad.

    The money that is saved can be utilized in benefit of the people working for company. Unless Win Win situation is not crated, Reduction in cost is difficult to achieve.

  3. in my office they decided to have paper napkins in the bathroom only on tuesdays and thursdays.in the name of ‘green sustainability’ and other latest irrational fads.it seems like the lunatics are in charge of the asylum everywhere

  4. I dont wanna reveal the company but MNC that i am working stopped Tea/Coffee service and shutdown AC at 6pm as part of cost reduction.
    I believe who ever suggested that should have a brilliant analysis done to show cost difference it makes in a 90 billion turnover company!!!

  5. The following scenario about cost reduction is more common with lot of SMEs in India.

    Month # 1 : Get all the dues from everyone and some times give discount for immediate payment.

    Month # 2 : Stop payment to all suppliers/vendors/contractors

    Month # 3 : Drastic cut down on straight forward expenses as the article highlighted.

    Month # 4 : Default the loans and time for some pink slips

    Month # 5 : Delay the salaries to employees

    Month # 6 : Bankrupt

    The employees should always be careful where owner equity is on loan or pledged.

  6. @ Raja— It is Infosys… the so called poster boy of IT industry… They should get into Hotel industry with their massive, showy DCs they have across the country. They are on a fast decline anyways…

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