Hackett Group: How to Cut Costs in a Recession

Ann All

In President Bush's recent State of the Union address, he was careful to avoid the use of the "R word." However, Forrester Research wasn't so reluctant, citing a "mild recession" in the U.S. as it scaled back its global technology spending expectations.

Forrester now expects U.S. tech spending to grow an anemic 2.3 percent this year, while global tech spending will grow 6 percent, down from its original forecast of 9 percent.

On that news, we find this CFO.com article titled Preparing Your Company for Recession to be quite timely. The article cites a three-pronged strategy from The Hackett Group:

  • Seek cost savings from long-term structural changes rather than relying on short-term fixes.
  • Look for ways to free cash from working capital.
  • Improve your company's planning and forecasting capabilities.

Hackett Group suggests looking at shared services centers and offshore locations for long-term savings on back-office operational costs. According to the article, a 2007 Hackett Group study found that 65 percent of companies utilizing shared services cut their costs by more than 20 percent, while 27 percent saved more than 40 percent.

 

To free cash from working capital, Hackett Group recommends thoroughly analyzing your company's customer payment processes, both to reduce excess receivables and to establish an accurate baseline in the event of even harder times. Also, consider reducing reliance on low-cost suppliers to avoid costly build-ups of excess inventory.

 

Planning and forecasting, while always important, become even more so in a recession. Among Hackett Group's specific recommendations: Use rolling forecasts rather than calendar-based budgets, and extend forecasting capabilities to suppliers and procurement organizations.



Add Comment      Leave a comment on this blog post

Post a comment

 

 

 

 


(Maximum characters: 1200). You have 1200 characters left.

 

null
null

 

Subscribe to our Newsletters

Sign up now and get the best business technology insights direct to your inbox.