January 30, 2012: Back in 2010, a leading financial magazine has observed that 2013 will be a period when a second recession will hit the global economy. This is the reason why cost reduction is still in the list of priorities for the organizations across the world. In the present day economy the condition is far more worrying.
A recent survey conducted by the Centre for Economic and Business Research (CEBR) has found that about 78 per cent of the small business organizations consider increasing cost as a major threat to them. More than 60 per cent of the organizations have witnessed drop in their profit margins as a result of rising cost, from 2009 onwards.
The Economic Intelligence Unit of KPMG in their authentic study conducted across the world has observed that majority of the business organizations are under constant pressure to cut cost, while most of them find it difficult to develop a sustainable solution to accomplish cost reduction. The survey included business organizations of all sizes where the senior managers were interviewed to collect information.
In addition to this experts from the field of cost management were included to make the survey more authentic. It is found that 90 per cent of the organizations are losing their chances to improve profits. More over it is observed that only eight per cent of the organizations are able to meet or outperform the target set by them in terms of cost saving. The most important barrier in the way of meeting the targets is the absence of proper processes to drive cost reduction.
In a recent article written by Kevin Stanley in FM world, he says that outsourcing has gained increased importance as cost reduction has become an essential need for the economic stability of the organizations. Organizations are still in a dilemma whether to outsource or to insource. The major drivers behind outsourcing are cost reduction, expertise of the service provider and improvement in efficiency. With outsourcing organizations will be able to focus on core business activities which will contribute to the growth of the organization. According to Richard Thompson, MD of PBMS, outsourcing is the best solution that will help in growing the organization during the period of economic uncertainty when cost cutting is more relevant.
KPMG says that the organizations that will determine and adopt sustainable cost reduction methods will have an edge over the competitors.