COST REDUCTION

Problem Proposed Solution Notes

Gross margin has come down
because of increase in COGS
Poor operational process
High Inventory
Not Using ERP to the full
potential. Manual MIS
 Explore fine wool vendors
from New Zealand to
reduce costs
 Change Vendors for dyes
(save cost by 5-10%)
 Explore option of local
vendor development for
fine wool
 Hedge prices for wool
 Invest in building and
infrastructure
 Invest in quality check
equipment to improve
operational efficiency
 Delaying the Dying process
can lead to low finished
goods inventory
 Sorting quality will lead to
lower inventory
 Invest in employee training
and mandate using ERP to
record all transactions to
avoid missing Discounts etc.
15% Indian wool is fine quality.
Possibility of local vendor
development would lead to
reduction in cost in lieu of duty
and transportation cost
reduction.
Run Reverse Auction for Dyes
Quality check equipment will
help do RCA of quality inhibiting
process/machine and Hence we
can plan where to invest in
CAPEX
Use littles law to calculate ideal
inventory for things like coal to
avoid high inventory holding
costs.
Also USE ERP for automate the
MIS this will lead to freeing up
manpower resources lowering
cost

BUSINESS (REVENUE) SCALE UP

Poor quality leading to stagnant
revenues and high inventory
Low share of revenue for
foreign customers
Poor Quality impacting
willingness to pay
 Invest in technologically advanced Think of ways to quantify
equipment how cost would be
 Identify bottlenecks and initiate impacted by increasing
tighter control for quality quality standards. What
 Employ highly skilled labor on exactly goes into
operating machines and quality improving quality
checks
Skilled labor would lead
to higher employee
costs. Assume additional
expense
 Increasing market share in foreign
markets (change the 80-20 split) Capture impact of
by investing in marketing after marketing spend on
quality is ensured income statement
 Try expanding to newer markets.
 Improve quality by above mentioned Can be used to
points. Market the new process and handle the
changed management Give free samples sensitivity points.
 Make an ideal ordering and inventory management process. Procure to pay mechanism
 Tying Employee compensation with financial performance of the company