News
Thursday 31. March 2011
| Current Allensbach study: Despite economic upswing, German companies want to continue to substantially reduce costs |
| Düsseldorf, March 31, 2011 – Four of five Germany companies want to reduce costs to improve their operative results. In terms of their application of cost reduction measures, large companies and corporate groups are clearly ahead of small and medium-sized companies. That's the result of a current survey of 501 top decision makers of the German business community conducted by the Institut für Demoskopie (Institute for Public Opinion Polls and Research) in Allensbach and by the Kerkhoff Competence Center of Supply Chain Management at the University of St. Gallen. Excerpts of the study are exclusively published in the online Financial Times Deutschland and in the April issue of the business magazine Impulse. |
| A total of 79 percent of large companies and corporate groups are relying on cost reductions for increasing profitability; in companies with a workforce of fewer than 250 employees, the rate is still 72 percent. The study had been commissioned by Gerd Kerkhoff, managing director of the consultancy Kerkhoff Consulting which specializes in purchasing and supply chain management. "Despite the current economic growth and the objective of increasing sales, Germany's economy also continues to clearly keep its focus on the subject of costs", says Kerkhoff. "International markets provide us with ever higher quality products and also more innovative products from abroad. So it's no longer enough that Germany is leading in quality. We must also be able to produce at competitive prices." Half the companies will want to reduce costs in production; in purchasing and procurement, it's every second company. With regard to personnel as well, 34 percent of the surveyed top decision makers said that they will further reduce costs in the future. Research and development generally need not suffer any savings measures: Only 8 percent of the companies want to save costs in that department. What's conspicuous: In production areas, much more large companies want to enforce savings (57 percent) than small and medium-sized companies (48 percent). In logistics as well, large companies (42 percent) see significantly higher cost reduction potentials than companies with a workforce of under 250 employees (29 percent). Production and administration: These differences are also noticeable in their measures. In terms of reductions in throughput times in production, only 35 percent of the medium-sized companies are using internal optimizations of production processes; in contrast, it's already every second of the large-sized companies. Already 69 percent of the companies with more than 1,000 employees have optimized their administrative processes. In contrast, it's only 60 percent of the companies with fewer than 1,000 employees, and only 52 percent even of the companies with 250 employees maximum. Purchasing and procurement: Half of the surveyed companies want to reduce costs in purchasing. "It's all the more surprising that, especially in purchasing, neither large nor small companies have any modern purchasing management", says Gerd Kerkhoff. In terms of cultivating their relationships with suppliers, a total of 81 percent of the companies with more than 1,000 employees are conducting standardized supplier evaluations; 86 percent systematically control their suppliers. This is quite different with regard to small and medium-sized businesses: Only 65 percent use standardized evaluations; only 63 percent use controls. Not only medium-sized businesses but corporate groups as well are losing particularly great potentials in tying their purchasing department into the overall enterprise. Thus, in only 41 percent of the surveyed companies, their purchasing department is "strongly" and "very strongly" involved in product development. In 44 percent of the companies, their technical departments are buying materials without involving their purchasing department at all (so-called "maverick buying"). Also, purchasing departments only rarely use new tools: Merely one fifth of the companies is using a tool for the exact calculation of costs of the purchased products ("cost breakdown"). And that rate is only 13 percent for companies with fewer than 250 employees. "Anyone wanting to carry out extensive cost reductions in purchasing must first modernize that area", says Gerd Kerkhoff. Finances: Refinancing costs can also be saved through a reduction in working capital. Gerd Kerkhoff: "I can see the greatest discrepancy between medium-sized and large companies in the area of working capital. Two thirds of the corporate groups are working on direct reductions; for medium-sized businesses, the rate is merely 31 percent. Most medium-sized companies obtain capital primarily through bank loans, while this applies for only 57 percent of the large companies. That means: Large companies are able to get more inexpensive refinancing and are thus set up much more professionally for the future. Small and medium-sized businesses should wake up!" About the study: The survey took place during the first quarter of 2011 and was conducted by the Institut für Demoskopie in Allensbach on behalf of Kerkhoff Consulting. A total of 501 top decision makers were surveyed from all sectors of the industry; generally, they included owners, managing directors, and board members. |
