In commercial business, there are two ways to maximize profits: increase income and keep expenses as low as possible. It’s the basic equation, and it’s been working for entrepreneurs and major corporations for more than a century. But some methods and strategies are better than others, which means owners must pay close attention to finding the best ways to cut costs in a sensible fashion. A good example is how drivers for major transport fleets take the time to do pre-trip inspections to prevent unexpected breakdowns.
Other tactics for holding expenses down include strategic outsourcing, just-in-time inventory practices, office-sharing agreements, and the use of independent contractors instead of regular employees. The good news for owners is that there are lots of effective methods for cost-cutting, and some of them are both painless and easy to implement. Here are some of the top approaches modern companies are using to spend less.
1. Efficient Fleet Management
In fleet management, the inspection checklist is a central feature of every driver’s documentation. The all-important list offers vehicle operators a streamlined way to remember what to do before every trip. For every non-passenger vehicle in a fleet, the driver performs a pre-trip inspection. The simple but essential documents not only save time but also help fleet managers by minimizing the risk of breakdown. From the drivers’ point of view, those who hold Class A CDLs (commercial driver licenses) are required to go through a standard pre-trip list before getting on the road. The document gives operators a clear idea of the kinds of things that might come up during a scheduled route. After passing the examination for CDL licensing, drivers rely on the checklists to remember all the tasks they need to complete before getting in their trucks.
2. JIT Inventory Systems
JIT (just in time) inventory methods originated in Japan and spread throughout the West in the 1980s. A champion of cost-cutting, the simple concept behind the technique is that owners should order goods so that they arrive just in time for sale. The goal is to minimize the expense of carrying inventory. In some ways, JIT is an impossible aim because it’s necessary to have at least a small amount of saleable goods on hand at all times. Warehousing, security, spoilage, and other factors combine to make larger stores of goods expensive for owners. JIT, now practiced by many of the world’s largest corporations, has eliminated entire categories of business expenses for those who use the system properly. For those who ignore the idea behind JIT, the expenses associated with receiving, storing, overseeing, insuring, protecting, and moving large inventories can turn an otherwise profitable concern into an unprofitable one.
3. Office Sharing
There’s a sweet spot for most entrepreneurs when it comes to the requirement for office space. In terms of sheer square footage, less is better. In an era when rents are unusually high, as a way to save money in the long run many owners are encouraging employees to work from home. When that’s not possible, companies seek to rent the smallest spaces possible. The third part of the combination is to find locations far from city centers in order to keep leasing costs down.