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triage is used in an emergency room when
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medical resources must be carefully
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prioritized to survive in today's
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economic crisis companies need to triage
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cash the lifeblood of a
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business by reducing cash needs quickly
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you take a top- down approach where the
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management sets the targets and takes
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tough decisions quickly the good news is
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that many businesses can cut overall
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costs by about 15 to 20% without
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undermining their Core Business
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strengths all within a matter of weeks
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instead of months to do that move
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quickly use a direct top- down approach
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instead of engaging all levels of the
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organization in a bottomup effort by
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doing that the top management will be
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able to drive the bottom line results
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quicker uh and that's exactly what's
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required the key is to purge
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inefficiency from operations do more
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with less where can you streamline
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operations cut costs and release
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cash reducing procurement costs in this
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current times uh offers immense opport
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opportunities the cost of uh Commodities
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are down drastically now is the time to
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renegotiate contracts to uh to align
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long-term needs with the short-term
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opportunities downsizing and delayering
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can quickly release cash but be sure to
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consider other
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options the problem with layoffs is a
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way simply to cut costs is it can often
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cost you a lot of money just to lay
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people people off you've got Severance
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payments you got legal exposure uh and
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then you have the problem if you cut
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people of how are we going to get the
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work done afterwards so there are a lot
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of interesting alternatives to cutting
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people as ways to save money even on
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Labor uh and they might include things
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like uh time off for people shorter work
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weeks sometimes even pay
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cuts rethink current
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activities stop non-critical it projects
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and low value tasks trim administrative
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costs and services cut back on temporary
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workers and minimize overtime also your
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R&D effort may be wasting resources BCG
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uses the rule of 3/3 to
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prioritize so the rule of 3/3 is a third
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are winners a third should immediately
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be stopped and a third do actually
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require some legitimate work we find
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that there's a tremendous opportunity in
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most compan ianes to take that bottom
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third out redeploy the resources and
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have more projects coming into the
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market faster with more financial
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results for the
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company tightly manage inventory AR and
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AP look to the balance sheet for other
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sources of
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cash my my three top recommendations for
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conserving cash in a downturn are
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receivables inventories and payables
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the same revenues you have the same
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expenses have the same profits but you
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can be generating considerably more cash
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if you manage your receivables your
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inventories and your payables
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properly and optimize your
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assets look for opportunities to
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consolidate make do and repurpose to
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defer Capital outlays look at your
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manufacturing Network are production
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facilities efficient enough with a lower
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utilization rate
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how asset intense are your operations
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and how flexible mergers and
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Acquisitions leave many companies with
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redundant assets and outdated plants can
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be costly to
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operate also focus on the core business
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and value
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delivered as multinational companies
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face the recession they do want to think
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about markets to pull out of they should
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be focusing more on their core and less
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on the the periphery they should be
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focusing on the customers that matter
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they should be focusing on the markets
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that matter they should be focusing on
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the places where they generate
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short-term profit and more importantly
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the places where they expect their
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long-term profit to come from disinvest
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if you are able to do so and focus your
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attention on the parts which will be
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able to generate the cash and the growth
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that the rest of the company uh might
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need a firm has to think much more
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critically about its um value added
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proposition it's easier when times are
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good to include lots of feature sets
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lots of
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services uh but now you have to really
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think very carefully what exactly is
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driving willingness to pay what's
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driving the purchase
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decision review your customer accounts
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and product
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portfolio review accounts and product
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lines where are the costs of sales or
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other costs unacceptably High some
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strategic initiatives should be delayed
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or ended reconsider consider new
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products with high ramp up costs or that
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costly push into an Emerging
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Market we recommend that you build
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scenarios and align cost reduction
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measures and needs to various scenarios
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and you can align your senior management
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team on these scenarios so that you can
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say if uh volumes shrink by 10% then
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we'll do X if volumes shrink another 10%
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then we already have a plan B make sure
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that Senior Management is aligned on
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your plan in times of Crisis there is
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little time for compromise and
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discussion they should act as Role
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Models making tough decisions and
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cutting visible status symbols early on
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to show that they're serious about
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making
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sacrifices prioritizing the ideas uh
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that your teams generate is crucial so
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you spend your your very little time you
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have to realize the savings on the most
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important things all Cost Cuts should be
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made in the context of
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strategy you need to understand what it
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is you want to be both in the short term
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as you go through the downturn and what
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you need to power out of the downturn so
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you become the winner in the
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upswing these steps will generate
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liquidity to weather the storm and
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position you for the
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upturn and companies with cash can make
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folder more strategic moves in a
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downturn and gain a Competitive Edge
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