Thursday, March 15, 2018

Avoiding the cost cutter's folly

It seems to come down to two prominant business philosophies: Either you are a cost cutter or you are a margin measurer. Never the two shall meet!

I can not profess to know much about margin measuring. Their strategies seem overly complex and rite with pitfalls. They are quite proud of their sophistication though, and proclaim cost cutting is overly simplistic. "Any jackass can be a cheap skate!", is often overheard.

There might be a little bit of truth to that stereotype. It's not that difficult to be a tight wad, but applying the idea successfully is a whole lot tougher than it sounds.

"Penny wise and Dollar stupid" pretty well sums up the typical folly of the cost cutter. Saving a penny today that ends up costing a dollar tomorrow is all too common of an occurance.

"Honey! I saved a lot of money on my last oil change. I just didn't do it!" Preventive maintenance is such an easy target. Why should you waste any money on something that is not broken?

Experience will prove the folly with that kind of short sightedness. Saving money on preventive action usually ends up to cost a lot of money later. But saving money on an oil change is an excellent demonstration of how complex cost cutting can be.

The first and biggest opportunity is with the labor to do an oil change. If you invest in learning how to do that, you will reap the rewards very quickly. Roughly half of the cost of an oil change is for labor. If you supply the labor, you will automatically save half of the cost.

If you take on the next cost, it will be the supplies. You pay for new oil and a new filter. Those are usually marked up by service providers, so you will save a little by buying your own. You can look to save there by shopping around. Be careful not to step on that slippery slope of compromising quality though. Educate yourself on what constitutes acceptable quality before you compare on price.

Just doing those two things will save you a lot of money. Most people are satistfied with reaching that plateau. Is it enough to save on parts and labor? Not for a dedicated cost cutter.

We can apply creativity to develop savings in placed that margin measurers fear to tread. Let's question the timing of that oil change. Who says it has to be done every three months or three thousand miles? That is a general recommendation espoused by the industry that benefits from it. What is the data and reasoning behind those assumptions?

You can go as far as having your own oil analyzed. Laboratory tests have gotten more common and lower in cost. They can tell you detailed chemical properties that you can use to modify your schedule. You will probably discover that it is not necessary to change your oil by the industry standard.  You might discover that the acid neutralizing properties of the additives  are the first to deplete. You can use that kind of information to change the oil, but extend the life of your filter. That is applying data to save money.

These cost-cutting concepts are starting to look more sophisticated than any jackass can do? How about sharpening your pencil and comparing synthetic oil to conventional? Or how could you save by buying supplies in bulk?

You can start coming up with methods rarely thought of. How about using software to plan your routes the way Fed Ex does? Or attending to details like tire pressure, alignment, or weight minimizing to minimize the engine load?

You can continue to go to extremes and discover new paradigms. The only limit to cost-cutting is your own imagination.


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