Advertisement

Blog

Shop Local, a Real-World Business Tale

Before you finalize your budget, take inventory. What do you really need?

A friend recently shared a story with me. Her company had been subject to budget cuts over the past several years. Each year the question wasn't if there would be cuts, but rather how much would be shaved off an already tight budget.

Because budgets had to be submitted before it was clear what the cuts would be, people began to pad their budgets in the hopes that they would be able to get the resources they needed for that year, and so they could stockpile resources for future years in case budget cuts were even deeper than anticipated. This year, however, things were different.

The company had a new CEO. She was convinced that continued budget cuts were not necessary. Rather, she maintained that there were hidden ways the company could save money. Unbeknownst to the employees, the new CEO looked in every closet, every corner, every storeroom, and every nook and cranny of the building and created an inventory of what was there.

She was shocked at what she found. For example, hidden away she found enough staples, copy paper, and pens to support the company for one, and maybe even two, years. The CEO had the supplies sorted and moved to the cafeteria. She then invited the employees to come and take a look.

What the employees saw were table after table covered in office supplies. The employees were then told that this year the budget process would be different. Instead of padding budgets, employees were asked to put together budgets that accurately reflected their needs. Additionally, rather than procure supplies from vendors, shopping would be local.

That is, shopping hours were posted and employees were told to bring their budgets to the cafeteria and do their shopping there. With very few exceptions everyone was able to purchase the supplies they needed. As a result, budget cuts were not necessary for the first time in several years.

At first glance, this story seems absurd. But, how often have you conducted a full inventory? Start by opening your desk drawer. What office supplies do you have hidden away so that they are at your fingertips, and not a walk away in the storeroom? Are you surprised by what you found?

Before you finalize your budget for this year, I challenge you to look in those dark, and not-so-dark corners, to learn what your company has on hand and what you really need. Can you too shop local? Think about your supply chain, too. How would you bring this lesson to the budget challenges there?

17 comments on “Shop Local, a Real-World Business Tale

  1. Hailey Lynne McKeefry
    August 30, 2013

    It's amazing how fear can cripple an organization…and how small changes can make a big difference. We've known for a long time in the supply chain that keeping stuff is expensive and foolhardy. thanks for the reminder.

  2. Nemos
    August 30, 2013

    True Story, yes sometimes it helps but moderation in that case also applies, order or consume what really is needed not too much not less. 

  3. ahdand
    August 31, 2013

    @Nemos: Yes its not towards either side but I think it varies based upon the situation and its demand level. 

  4. Himanshugupta
    August 31, 2013

    I think those who have been working in an organization long enough know what to do in difficult situations as they are familiar with the nerves of the organization. Sometime shaking the management help in breaking the long held beliefs in the organization and incorporate new habits.

  5. SP
    August 31, 2013

    That's really a nice way to show the employees how to cut down costs and whenever cost cutting is needed cutting down stationay items is among top five items shop locally is absolutely correct

  6. Daniel
    August 31, 2013

    “I think those who have been working in an organization long enough know what to do in difficult situations as they are familiar with the nerves of the organization. Sometime shaking the management help in breaking the long held beliefs in the organization and incorporate new habits.”

    Himanushu, in that situation, what we can do is go for a financial and manpower audit. Based on findings, team can be reshuffle for optimal usage and on which way financial losses are happening can be traced.

  7. Daniel
    August 31, 2013

    “True Story, yes sometimes it helps but moderation in that case also applies, order or consume what really is needed not too much not less.”

    Nemos, in most of the cases what we found is the major revenue consuming parts are untouched. I mean the salary, benefits and other perks of top officials are touched. The very first step they used to exercise is downsizing the team at bottom & middle management

  8. Daniel
    August 31, 2013

    'A friend recently shared a story with me. Her company had been subject to budget cuts over the past several years. Each year the question wasn't if there would be cuts, but rather how much would be shaved off an already tight budget.'

    Frank, I think majority of our community members may have similar story to share, I meant that its common in all companies, especially when there is a financial instability.

  9. t.alex
    September 1, 2013

    Well, I would have a slightly different take. 

    These are stationary items and would not cost much anyway. What really matters are the big purchase or the complicated contract decisions that might cost the company million of dollars. These really need strong shaking of the management rather than stationary items.

  10. Lavender
    September 2, 2013

    Usually, in the budget of small things, such as paper, pen, possible need are added into budget, but to accurate need. Maybe after recycle and reuse this account can be out of shopping list. 

    What's the new CEO do is a good reminder. 

  11. Eldredge
    September 3, 2013

    Unfortunately, many organizations punish cost-conscious departments or individuals by creating an environment that encourages to “spend the budget this year” or you will be given a resticted budget next year.

  12. FLYINGSCOT
    September 4, 2013

    If we all spent company money as if it were our own then we'd be a lot better off. Unfortunately the budgeting process in many compaies is more of a game of cat and mouse.

  13. Hailey Lynne McKeefry
    September 4, 2013

    @t.alex, i would argue that the “penny wise, dollar foolish” rule would apply here. Certainly, the pencils, pens, and paper are a small bit of the budget but it points to something in the corporate DNA–a fear based need to keep stuff in hand. I imagine that if that's the corporate culture, it would trace all the way to the bigger purchases.

  14. Hailey Lynne McKeefry
    September 4, 2013

    For those that want to understand the broader impact of this type of issue, make sure you read Gerry Faye's post Getting More For Less Out of Your Logistics Operations. It provides an excellent look at how cutting costs is important throughout the supply chain.

  15. t.alex
    September 6, 2013

    Hailey, definitely this kind of fear has to be wiped out completely from companies. I believe this only happen in big companies, not the small ones.

  16. SunitaT
    September 22, 2013

    @ t.alex, It might not cost much when we look at it as a standalone expense, but in the bigger pictures, every bit counts. What we need to think is how many such low expense things are there. Austerity measures always start from such small things. In our search, we can find some big things as well that would save us much more money.

  17. SunitaT
    September 22, 2013

    @ Jacob, you made a relevant point indeed. Downsizing teams at the bottom and middles levels doesn't only hurt those low and medium paid workers but also affects the smooth functioning of the organization as well. It is at the bottom and middle level where bulk of the work is executed. Cut the executioners, you cut the valuable work as well that they do.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.