Cut costs, not performance

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This week UK unemployment is expected to rise above the two million mark, with estimates for the jobless total over the course of the recession set to reach as high as three million. But as companies trim their staff in proportion to loss of business, a number of questions come to mind.


Of particular concern for the supply chain is the impact staff cuts might have on customer service. Finance chiefs may well determine that a 20 per cent reduction in business should be reflected in a 20 per cent reduction in heads, but rough cuts made on this basis are often arbitrary in nature and can present a danger to the company’s competitive position. Survey results suggest that companies are reducing their inventory holdings but expecting more frequent deliveries from fewer suppliers. In tough economic times, when customers are making critical decisions on which suppliers to retain based on supplier performance, ensuring pick accuracy and on-time delivery is going to be essential.


This is not to say that cost efficiency should not be pursued. Adjusting shift patterns, reducing over-time and introducing more flexible working arrangements can help take cost out while still retaining competitive performance. Moving to annualised hours may offer further flexibility.


Another key concern is the potential loss of good staff. In times of expansion finding the right sort of people can be difficult, especially were competition for the labour pool is high. Cutting head-count inevitably has a negative impact on staff moral and damages the team spirit that is responsible for maintaining performance. Keeping staff moral high is hard in pressing times, but none-the-less important. After all, when the recovery comes, it will be dedicated, well motivated individuals that will carry the business through.

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