Rath & Strong Blog

Cutting Costs in an Economic Crisis

This has been a dramatic and unforgettable year, a demarcation.  Jeff Immelt, the CEO of General Electric, recently remarked:

“this economic crisis doesn’t represent a cycle. It represents a reset. It’s an emotional, social, economic reset.”

Now, as we survey the wreckage and try to understand how things can have gone so wrong, so fast, it’s time to get back to basics.  We need to get back to where Process Excellence, Lean and Lean Six Sigma thrive. As in every downturn, who succeeds and who fails is likely to be determined not by what costs are cut, but how they are cut and above all which ones are not cut.

Also, today time is of the essence so organizations need to drastically cut costs and do it rapidly. The danger is that, in their haste, organizations cut the wrong costs and damage their long term viability and competitiveness. The concepts and methodologies behind Lean and Lean Six Sigma hold true more than ever in this environment. Applying the concepts and methodologies of Lean and Lean Six Sigma across the value chain helps organizations align operations with the customer and market and offers them the flexibility to react quickly to sudden changes in demand. This in turn enables organizations to balance the workforce and reduce costs while still meeting customer’s needs.  In this economic climate, organizations, more than ever, need to focus on programs that balance the need to rapidly reduce costs while maintaining long term competitiveness.