(April 6, 2009) — Your editorial “Firms get inventive on employee upkeep” [Feb. 16, Page 6] addresses a critical issue. Now with unemployment reaching levels not seen since the recession of the early 1980s, many sectors in the plastics industry are fighting for survival. In particular, those supplying the automotive sector are being badly hit, many with revenues down more than 50 percent from last year. The roller coaster of resin prices following oil on a crazy ride has not eased the problems faced by many. So what else can employers do?
Aside from the major costs associated with core expenditures like raw materials and personnel, indirect costs still can be significant, often accounting for 10-15 percent of total expense. Energy, too, is a big-ticket item, but scope for savings is often limited, at least in the short-term. Some states are regulated and many efficiency projects require capital. There are resources available for energy assessments through the Department of Energy, and participating universities in the Industrial Technologies Program. (For information, see www1.eere.energy .gov/industry/saveenergynow.)
What else? Well, freight costs generally can be improved upon, but for many plastics businesses, the customer picks up this tab.
At this point basically nothing is off-limits for review under the cost-cutting microscope. So consider the many other often-ignored cost categories, which collectively total a substantial dollar figure: waste management (less frequent pickups of garbage dumpsters without jeopardizing sanitary conditions); factory consumables (products such as pallets may exceed requirements, mats may be cleaned less frequently without affecting safety); payroll processing (you may be paying for more services than you use); uniforms (put procedures in place so that uniforms are turned in when employee leave); forklift services (When was the last time you went out to bid); equipment leasing (Check for ever-green clauses that automatically renew at existing rates), insurance (you may have too much coverage for one risk and not enough for another) .
With the right knowledge and experience, costs in these areas typically can be reduced by around 20 percent. But how do you do that when you have already cut your staffing to the bone, or beyond? One approach that provides quick results with a minimum of staff commitment and no out-of-pocket expense is to use cost-reduction consultants who work on a contingency basis.
Peter Nowell is a former operations director for a plastics compounding company and now a Dublin, Ohio-based director for consulting firm Expense Reduction Analysts Inc., based in Carlsbad, Calif.