cost reduction
28 Nov

31 Uplifting Cost Reduction Strategies You Should Try

For supply chain, procurement, logistics, and operations professionals one of the top goals is to reduce cost while keeping other metrics such as on-time delivery, quality, productivity, and safety at the highest possible level. Whilst the focus is there, it’s hard to find many cost-reduction strategies.

So, what should you do?

While most businesses concentrate on increasing sales and reducing outlays, it is equally important to focus on cost-reduction strategies when trying to attain profitability.


As one of my colleagues put it

“Volume is Vanity, Profit is Sanity and Cash is King”


That is partially because profit margins come in several flavors and are often accessible in exceedingly multifaceted ways. While you cannot force your clients to spend more or pay more, you can control costs in most circumstances. The trick is knowing which cost-reduction strategies to apply, and by how much. Here is a look at some easy cost-reduction strategies to expand your brand’s net profit margin by reducing common expenditures, without obstructing your activities, and goals, or even slowing down your business’s ability to grow. Some apply to manufacturing businesses, but most of them could apply to any business.

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1. Negotiation Power


Remember, everything is negotiable unless explicitly stated in a contract. Entrepreneurs tend to look out for each other, and simply asserting that you own a business can often secure discounts. This is especially applicable to Direct and Indirect Buyers trained to negotiate, aiming for a 3-7% year-on-year cost reduction in their respective commodities and categories.


2. Deploy Lean & Six Sigma Tools & Philosophies


Over decades both Lean and Six Sigma have created savings in millions when deployed in a structured fashion with the right leadership and support structure. Deploy Lean and Six Sigma tools and philosophies to achieve significant savings through structured implementations. The primary goal should be to improve flow rather than merely focusing on material and labor cost reductions. Explore resources like isixsigma for more details.


lean six sigma


3. Buying (Gently) Used Products


There is no place in your business bylaws where it is stated that you must purchase only glittery new equipment. So why not purchase gently used Products, when it makes sense? Depending on what your business does, you can find gently used Products on Assembly equipment, Glassware and cutlery, Furniture, Office Technology, Personal technology, Vehicles, and Storage equipment.


4. Optimize Transportation & Logistics


Explore savings in freight, warehouse productivity, structural changes, consolidation, or outsourcing non-core activities to specialized 3PL or 4PL providers. While owning a warehouse and fleet may seem appealing, it is often expensive and can lead to inefficient asset utilization.


5. Evaluating Worker Perks and Fringe Welfares on Merits


In several industries, talent struggle is aggressive. On top of juicy packages and substantial time-off allowances, many businesses offer marvelous perks and fringe assistance in a constant arms race to entice ultra-qualified staff. However, with time, they can disturb productivity. To enhance self-esteem and shape amity, substitute luxurious perks for cheaper, social ones like team-building events, employee recognition programs, or Amazon vouchers!


6. Freelancers and Contract Labor for Minor Works


Freelancers and autonomous contractors are easier to hire and more economical to keep than traditional staff. You are not expected to offer health insurance welfare, pre-tax retirement accounts, or other pricey assistance. You just need to pay them for completed work. These cost-reduction strategies serve better during one-off projects and non-core activities.


7. Supplier Consolidation and Relationship Enhancement


Streamline your supplier base by consolidating similar services or products with a single, reliable supplier. By fostering strong relationships with key suppliers, you may negotiate better terms, such as extended payment periods or volume discounts. This approach not only reduces the administrative burden but also enhances collaboration, potentially leading to cost savings and improved efficiency.


8. Inspire Telecommuting


For thousands of business owners, telecommuting has marvelous cost-cutting potential. Regrettably, that potential is still mostly untapped. With this cost reduction strategies, business owners can be directly impacted by reduced utility costs through lesser electricity/water usage, reduced travel costs for employees, and reduced time lost to commuting.


9. Trade Management Saving


For most manufacturing businesses the importing and exporting of goods is very common, and for companies who are importing and exporting out of the EU, the trade management bill is heavy.

Ask around and you will be surprised to know very few people know the benefits and details of GSP, i.e. Generalised System of Preferences (GSP) system under which the EU – and other developed countries – offer developing countries lower tariffs on their exports into the EU. In other words, you can save import duty if your goods qualify.

Similarly defining the country of origin correctly is very important in trade management. Inadequate processes can cost you a lot of money!


10. Avoid Procrastination and Inspire Effective Time Management


Time is money, and this simply implies wasted time is wasted money. Every minute spent procrastinating is a minute that is not being spent on productive work. If chronic procrastination is becoming an issue, figure out why and take suitable steps to address it. Procrastination is not a catch-all offender for office efficiency woes. Some are better at the time than others. The use of Project management apps and inter-organizational messaging tools are part of this cost reduction strategy which can go a long way toward streamlining functions necessary to your brand’s goals.


11. Energy-Efficient Technology Adoption


Embrace energy-efficient technologies and equipment to cut utility costs. This could include upgrading lighting systems, HVAC systems, and machinery to more energy-efficient alternatives. Government incentives and tax credits are often available for businesses investing in sustainable technologies, providing an additional financial benefit.


12. Lessen Paper Use


Like reducing energy and water usage, reducing paper use is good for your business’s bottom line and the environment at large. There are countless ways of applying these cost-reduction strategies, for example, paperless pilling, cloud storage, etc.


13. Limiting Travel Expenditures


Permitting staff to telecommute reduces travel costs, keeping more money in your pockets. Reducing company-paid travel is an even better deal for you. Sure, there is no alternative for team-building at business conventions, or expert meetups. But that does not mean you need to travel for every client meeting. For large summits, virtual meeting systems with telepresence abilities can easily be used.


14. Digital Transformation for Procurement


Invest in digital procurement solutions and automation tools to streamline the procurement process. Digital platforms can optimize supplier management, automate routine tasks, and provide real-time insights into spending patterns. This not only reduces manual errors but also enhances overall procurement efficiency, contributing to cost savings in the long run.


15. Make even Plan Costs with Usage


Your business undoubtedly pays for a lot of indispensable services – telecoms, cloud storage, and possibly even legal support. At least, these plans should be reviewed once every year to determine whether they meet your requirements. If your business is paying for capacity not needed or used often, you can likely trim to an inexpensive plan without harming your brand. Equally, if you are regularly above the limits of a lower plan, you could be charged a lot more.


16. Minimize inventory – Reduce


As I have mentioned before Inventory is the cash sitting in your warehouse in the form of a product! Apply these 18 inventory reduction strategies to reduce gross inventory and, in turn, inventory carrying costs.

The question is can you claim a reduction in inventory carrying cost as a real hard saving?

In my experience, there are two schools of thought in the finance community:

  1. Unless I see more cash in my bank account it is not a saving
  2. By reducing gross inventory, we are increasing turns hence, improving cash flow.

I am always friends with 2nd group of controllers for obvious reasons!




17. Only Purchase in Bulk When It’s Profitable


It seems counter-intuitive to recommend against purchasing in bulk. However, before pledging to bulk buying, make a simple inquiry: is it profitable to buy bulk of one thing? On the other hand, if you have vividly cut such usage in recent times, it may not make sense to buy in bulk to get a slightly better per-unit rate. This cost-reduction strategy requires moderation.


18. Paying Invoices Earlier


Numerous sellers offer small but expressive discounts to clients who pay invoices ahead of time. As long as disbursing early does not harmfully influence your cash flow, it usually makes monetary sense to do so. This is particularly true in a low-interest environment, where the cost of short-term lending bridging any deficit is not likely to surpass the value of the reduction.


19. Pool Funds with Other Side Businesses


When it comes to buying supplies, and equipment, you should be able to recognize the strength in numbers. Several businesses lessen recurring costs by pooling resources with other small businesses, and these cost-reduction strategies cut across broader layouts.


20. Collaborative Cost-Sharing with Suppliers


Explore opportunities for collaborative cost-sharing initiatives with your suppliers. This could involve jointly identifying areas for cost reduction, implementing efficiency improvements, and sharing the resulting savings. Collaborative partnerships incentivize suppliers to find innovative ways to cut costs, benefiting both parties involved.


21. Put Off Extra Appliances, and Machinery After Hours


This is an agonizingly forthright cost-reduction strategy to reduce electricity or gas bills without upsetting operations. And once your employees get in the habit, it is painfully easy too. In a normal office setting, PC workstations encompass the sole major additional energy suck, so ensure every PC is put off before heading out. Or if you are into heavy manufacturing where boilers, CMM machines, or any other heavy equipment is not required overnight, turn it off. Shut off overhead and desk lights too or use the sensor lighting which turns off when no movement!


22. Use Practical Healthcare Changes


Most staff benefits packages comprise some form of healthcare treatment. Salaried staff expect companies to make available healthcare services, and it is undoubtedly the right thing to do. Regrettably, it is also becoming more expensive. Tax-advantaged health savings accounts are particularly beneficial as a cost reduction strategy as they allow staff to take possession of their healthcare selections while shifting risk away from the business owner. When combined with other health insurance campaigns, they may serve as appropriate substitutes for old health insurance plans.


23. Using Office Space More Resourcefully


Office spaces have become more resourceful for years now. With these cost-reduction strategies, you can redesign your space around these and other space-efficient ideologies. This allows you to do more, even if you are growing, and anticipate a move into a larger, pricier space.


24. Using High-Tech Replacements to Legacy Systems


How many legacy machineries do you have around your workplace? That is highly dependent on what your brand offers. Reputable manufacturing and light industrial firms are often burdened with lots of old machines and systems that they wish to replace, even if doing so would decrease costs and increase output in the long run. In such an industry, the struggle from legacy systems is not always as clear-cut, but that does not mean it is not real. Using High-Tech Replacements for Legacy Systems should also be seen as a part of cost-reduction strategies.


25.    Using a Programmable/Smart Thermostat


Heating and air conditioning are not negotiable outlays. Small variations in your facility’s ambient temperature can unfavorably influence your clients’ comfort and staff’s output, intimidating your top and bottom lines. But that does not imply you cannot apply some cost reduction strategies. With programmable/smart thermostats, you can cut your climate control prices without reducing comfort.


26. Using Passive Energy-Saving Measures


Balance the cost-reduction strategies above with passive energy-saving measures. This lessens your climate control, lighting systems’ capabilities, and carbon footprints. Before starting an energy-saving project, determine whether it meets the requirements for local, state, or federal energy-efficiency tax credits. Most energy-supping appliances and moderate renewable energy projects often do.


27. Recognize and Control Your Location Costs


Not all economies are equal. Some locations are perfect to start growing a business while others are not. Collectively, your business location plays a key role in arranging the former from the latter. When you can Recognize and Control Your Location Costs, this Cost Reduction Strategy will aid you relocate to a lower-cost region. If moving is not a choice, you need to understand your location costs, identify tolerable ranges, and learn how to tweak the numbers in your favor.


28. Reward Responsible Spending


As the old saying goes, you spend money to make more. Every money you invest has a rate of return and can take longer to materialize. If your credit is good, you can use a small business credit card to cover answerable spending on inventory you would procure anyway. Keep in mind that some cards carry annual fees, but you can counterbalance those with modest use.


29. Shop Round for Vital Services


Most business operates in competitive sectors. Use this to your benefit by going around for vital services – or simply threatening to shop around at the right time. With these cost reduction strategies, you can find insurance firms offering hefty discounts or bonuses to clients who leap rivals.


30. Social Media Advertising Influence


Traditional advertising is expensive compared to paid social media advertising. Social media ads are also inexpensive to make. Though it is increasingly common to see slick video spots on social media, the most profitable social ads remain simple, inexpensive memes. If you devote time and personnel to winning your brand’s fans and building your social media followers organically, this cost-reduction strategy can reach millions of current or prospective clients while spending less.


31. Barter Exchanges


Today, most dealings use exchanges backed by central banks, but that does not imply non-monetary exchange is outdated. As part of cost reduction strategies, the digital revolution has given rise to a dedicated cottage industry of barter enablers. There are limits to what you can exchange, but it is worth observing if you believe your products or services make respected trades.




Every business is different. Still, it is almost certain that your business records comprise at least some fiscal fat to cut off. Even if you believe you have taken all the non-essential spending, it may be worth it to still apply some cost reduction strategies listed above. It would not cost any additional fee, and might even produce a noteworthy payoff within the shortest period. What are you doing to reduce your business’s expenses as you keep growing? Learn and apply these cost-reduction strategies to improve your finances and business profit today.


If you have more ideas and suggestion on how to save cost, please do share in comments below.


Recommended Reading:


Cost Reduction and Optimization for Manufacturing and Industrial Companies

Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

Integrated Cost Reduction

Cost Reduction Analysis: Tools and Strategies

About the Author- Dr Muddassir Ahmed

Dr Muddassir Ahmed is the Founder & CEO of SCMDOJO. He is a global speakervlogger, and supply chain industry expert with 17 years of experience in the Manufacturing Industry in the UK, Europe, the Middle East, and South East Asia in various Supply Chain leadership roles.  Dr. Muddassir has received a PhD in Management Science from Lancaster University Management School. Muddassir is a Six Sigma black belt and founded the leading supply chain platform SCMDOJO to enable supply chain professionals and teams to thrive by providing best-in-class knowledge content, tools and access to experts.

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