Cost Reduction

Cost reductions, productivity enhancement and lean organizations have become essential for survival of organisations. Cost reduction and control can be implemented in various areas of a business such as raw material procurement, Logistics, Warehouse and Stores, Manufacturing Process, Energy, fuel & Water, Information Management, Human resources, etc.


Tips for Cost Reduction and Improvement of Profits

MSMEs can follow the below mentioned tips in their day-to-day activities to keep a control over costs and ensure improvement in profits.

  • Recycling and reusing
    • Use the plastic bags, envelopes and other packaging from your suppliers as these can make good trash bags.
    • Save and reuse photocopy and print papers which had errors in the document. If it does not contain confidential information these papers can be used for writing or scribbling notes by staff than using new notebooks and notepads.
    • Learn to photocopy and print on both sides of the paper. Buy photocopiers and printers that can do this with ease and bring in a company policy requesting all staff to photocopy on both sides of the paper.


  • Use of cost effective materials
    • Stop using paper napkins and paper towels. Cloth towels are more absorbent and can be used over and over again. They also clean much better than paper.


  • Think twice before purchasing
    • Think about every purchase before you make it. Ask yourself whether you need it or simply want it. Do you already own something that will perform the same task? Is it of good quality or needs replacing after a few uses? Most importantly, are you willing to put off your profit improvement and cost reduction goals to have it? If an item is superfluous, just say no.


  • Energy efficient methods
    • Harvest solar energy and use it for your heating and cooling needs. The government also provides many incentives and rebates are changing over to solar energy usage.
    • Install ceiling fans where possible.
    • Open the windows. Arranging to open the windows will reduce not only your heating costs but also lighting.


  • Lower electric consumption
    • Use energy efficient bulbs.
    • Install systems and methods where light bulbs in certain areas are switched off automatically.
    • Turn off lights in conference rooms, restrooms and officers when they are not in use.
    • Request and educate your staff to shut off and switch of all electrical equipment and laptops before they leave office at the end of the work day.


  • Reduce water wastage
    • If your toilets and commodes do not have two buttons for half flush and full flush change or install them. This will save substantial amounts of water during the year or on a long-term basis
    • Use taps which stop automatically after dispersing a limited amount of water.
    • Repair leaking toilets and faucets.
    • Use mulch and other and water reducing systems for your office lawn such as drip systems and providing additional shades to reduce evaporation.
    • Learn to harvest rainwater and save them in huge tanks.


  • Improve staff productivity
    • Have a no smoking policy or reduced smoke-time. Many staff members spend a lot of time outside office in designated smoking areas. Sometimes other staff members accompany them jointly wasting a lot of productive time.
    • Target specific training opportunities for each employee that helps him or her in improving performance.
    • Invest in your employees by giving them the tools that boost their productivity.
    • Give extra incentives for more work
    • Boost the team’s morale by publishing and acknowledging team’s accomplishment.


Read below articles on Cost reduction
Source: Indian Institute of Materials Management


Read below case studies on Cost reduction
Source: Microsoft, TQM International


Various articles of Skanda Kumarasingam, Management Professional,