Redefine the company's cost structure to select the costs that generate profit. Cost management must become standard operating procedure. Management and employees must be constantly identifying opportunities for eliminating or reducing unprofitable work. A company may need to eliminate departments, or it may need to consolidate or even expand departments based upon where their spending generates revenue. Measure Decisions Against the Strategic Business Plan.
Every company needs to have a long-term business strategy.
Cost management should be part of the strategy and be influenced by the strategy. Cost decisions should be measured against the company's strategy, rather than a current short-term situation. A company should not buy an excessive amount of inventory because the manufacturer has lowered the price to get rid of it. The company should be buying the amount it needs to satisfy its customers. Controlling costs through short-term cost cutting leads a company to unprofitability.