DO YOU CONTROL OR FINANCIAL CONTROL COST? ASSOCIATED ARRIAGA, STRATEGIC CONSULTING, COSTS, OPERATIONS AND SHOPPING, SPECIALIZING IN SMES. NOW ALSO IN ZARAGOZA, SPAIN Reviewed by Momizat on .   DO YOU CONTROL OR FINANCIAL CONTROL COST? Eating a low-cost policy may require financial problems. The easiest way to reduce costs is less flexible: make larg   DO YOU CONTROL OR FINANCIAL CONTROL COST? Eating a low-cost policy may require financial problems. The easiest way to reduce costs is less flexible: make larg Rating: 0
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DO YOU CONTROL OR FINANCIAL CONTROL COST? ASSOCIATED ARRIAGA, STRATEGIC CONSULTING, COSTS, OPERATIONS AND SHOPPING, SPECIALIZING IN SMES. NOW ALSO IN ZARAGOZA, SPAIN

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DO YOU CONTROL OR FINANCIAL CONTROL COST?

Eating a low-cost policy may require financial problems. The easiest way to reduce costs is less flexible: make large orders to lower the purchase price and to ensure a much more organized production. It is about producing large quantities and production runs to avoid the costs of preparing machines and avoid downtime losses. The aim is a uniform production of large orders that will also serve to improve the productivity of labor and machinery. They generate large stocks of raw materials and finished products to ensure a good supply for the production and distribution as well as full trucks can be loaded and reduce transport costs. In short, if a company has a policy to crack reduction table to be more competitive costs may be prone to greater investment in stocks and a loss of service to customers that they will be providing in terms of internal organization production and transport optimization.

By contrast, a policy of reducing the financial investment in stocks, with small purchase orders, with small batch production and sales with a less optimized transport, an increase in costs. In addition to a policy based on the reduction of funding often leads to policies to reduce credit to customers and lower collection periods, which makes it even more sales.

In this situation there are companies that swing to reduce costs to become more competitive, but can have serious financial problems because of the enormous increase in stocks. A company that tilts to the reduction in funding may have increased costs which makes the company less competitive and difficult sales by the policy of reducing payment periods.

Our consultants experience has taught us several things:

Companies must weigh between two poles: cost reduction or reduction of working capital financing needs. If a company is more beset by falling sales and liquidity problems is less is more scope to seek greater cost savings than one that is almost an insolvent due to lack of financial resources.

It must break the pursuit of seeking departmental efficiency overall efficiency of the company. The departments must be coordinated. The general direction should change departmental objectives and try to change the culture. If a department is evaluated only in terms of productivity will never be interested in coordinating with the finance department or the sales if that penalizes.

It should facilitate the meetings of the management team to achieve this coordination. Sometimes departmental objectives and the balance will change and we must agree on the activities of each department.

You have to work hard to make the company much more flexible. Undoubtedly the reduction of costs or reducing funding needs may conflict fester company is very flexible. However, when a company becomes more flexible both objectives can be compatible, as we demonstrated by the Japanese company with its policies TOYOTA Just In Time.

Arriaga Associates has worked on projects with SMEs with serious liquidity problems, with a need to reduce costs and improve their ability to service and supply to customers. The results have been excellent.

Production department, purchasing and operations. Arriaga Associates.

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