I won’t pretend that I know very much about financial strategy, but just like everyone else out there, I’m a struggling consumer just trying to stay afloat amidst current economic hardships, so that at least grants me the right to an opinion on the topic.
While trying to make sense of “recession strategies” on a large scale industrial level, I found that it made sense to start with something more tangible for me – such as my own personal recession strategy – and then apply this strategy to the manufacturing industry.
For example, one thing that we all try to do during tight economic times is cut back on unnecessary spending. At the same time that I’m deciding to buy the whole stalks of celery instead of the pre-cut, pre-portioned, perfectly packaged celery, the manufacturer of this celery might also be deciding that maybe all the extra packaging and prepping isn’t paying off. Reducing the amount of packaging, packaging in bulk or changing packaging materials has the potential to save companies millions. Take the Poland Spring Eco-Shaped bottles for example. Not only are they saving on raw materials – using 30% less plastic per bottle and 30% smaller labels – the bottles are lighter and thus cheaper to ship. In addition to their cost savings, they can also position themselves as a sustainable company that is making an effort to reduce their environmental footprint, thus increasing their sales.
Secondly, another smart strategy is to avoid putting yourself in (or further into) debt. If I’m uncertain about my economic future, I’m not about to enter any agreements that involve long-term financial commitments. Making capital investments in a recession is a big deal and should not be taken lightly. This is mainly because once capital is invested, it is not easily recovered for reinvestment into anything else.
And finally, I pay close attention to where and how I spend my money. Indirect spend is just as applicable in our personal lives as it is in business – and represents a huge opportunity to save money. I recently discovered, for example, that some states allow you to choose your electricity supplier – which means you can evaluate deals and offers from numerous suppliers and pick the one that saves you the most money. Doing some research and making an informed decision seems a lot smarter than blindly paying an electric bill each month. We recently ran an article for Food Manufacturing on this topic. In it, the author discussed how many companies overlook vast savings opportunities associated with their indirect spend. By pursuing “smarter sourcing” of indirect goods and services, companies will not only realize significant one-time savings, they will enjoy them year after year. When you consider that for most manufacturing companies, indirect materials represent about half of the company’s total spend, this could potentially add up to big savings.
Fortunately for us consumers and industry in general, economic cycles mean that if we can at least stay afloat during tough times, better times should be around the corner. Staying smart with our money when times are tough might just be the “edge” we need to survive.
Click here to read IMPO editor Anna Wells’ take on recession strategies