"In tough times, luxury should get a quiet burial" | Outlook Business
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HIGH FIVE

"In tough times, luxury should get a quiet burial"
RPG Group CFO Subba Rao Amarthaluru on managing costs during a downturn

Work for cost leadership: The most durable cost reduction comes through cost leadership. You must follow the Japanese adage, ‘You can squeeze water even from a dry towel’. Adopt focused initiatives on the shop floor to reduce resource consumption, prune wastage, discover low-cost substitutes and hike plant availability.

Go for down-to-the-bone negotiation: Save costs by making someone sacrifice a part of his profit. Renegotiate with vendors down to their bones, without breaking their bones. They will eventually agree to contribute to your cost reduction by ceding some profit. Inject faith in them and when good times are back, return the favour.

Sack luxury costs: In good times, luxury is comfort. In tough times, luxury is a criminal functionality that gives unproductive comfort. Business class travel, beach conferences and get-togethers should be given a quiet burial.

Rationalise human resources: Weed out the good time "growth benches" for the larger interest. Remember the Vedic adage: For the protection of a family, sacrificing an individual is not adharma; for the protection of a village, sacrificing a family is not adharma; for the protection of a country, sacrificing a village is not adharma.

Working capital management: Rework your logistics and resource movement methodologies to reduce inventory. Work with customers to achieve a precise collection of receivables. Explore reduction of credit period to customers the way you would renegotiate prices with vendors.

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