In today's weak economic environment, large corporations and businesses are drawing on a long history of cost cutting techniques, some of which might surprise you. Removing one item or service from their day-to-day activities might seem insignificant in the short-term; but in the long-term, that slashed expense might lead to big savings over the course of the year.
Take a look at the famous urban legend surrounding American Airlines. In 1987, it was rumored that removing an olive from their salad saved American Airlines around £120,000 that year. While this might not be a solid fact, it does show how one seemingly insignificant cost cutting move can dramatically reduce a large corporation's expenses. A newer example of this can be seen in the case of airline baggage fees. Beginning November 6, Spirit Airlines will begin charging a £130 carry-on bag fee each way, resulting in a potential £300 round-trip fee for travelers. Baggage does weigh down an airplane; and in today's era of high fuel prices, airlines are becoming unwilling to absorb that cost.
Another example of Spirit's cost cutting measure is in ticket printing costs. Starting November 1, Spirit will charge customers a $5 fee to print their ticket at the airport, passing down something as small as the cost of paper and operation of their printing kiosks. In the UK - airline Ryan Air has famously charged customers anywhere up to £60 for forgetting to print their boarding pass, and the £60 charge is taken when the airline has to print them for the customer - a mistake many have foolishly made.
Even more substantial cost cutting can be seen in the case of Bank of America. As Bank of America continues to rebuild after 2008's financial collapse, they have slashed their corporate jet fleet in half, and laid off a significant number of their pilots. The replacement cost of these jets is over $100 Million, and the move gives Bank of America significant cost savings in salaries, fuel, and maintenance of their corporate jet fleet.
In the end, the finest example of cost cutting is the reduction in workforce seen through the millions of layoffs that occur during arduous economic times. In 2011, Cisco Systems laid off 9% of its workforce. That same year Merck & Co. laid off approximately 13,000 jobs after it merged with Schering-Plough. HSBC is in the process of letting 30,000 workers go over the next three years, reducing operations at many of its worldwide branches.
But not all cost cutting is as severe or as worrying for employees. Companies such as Hawtrey Dene (who are cost reduction specialists based in London) specialise in finding areas of overspending and helping businesses lower their costs and their outgoings - without necessarily taking people off their salaries. It could be something as simple as relocating to another office, which could save you thousands in rent every year. Perhaps taking all your documents online - and going paperless will be the trick that get's you saving rather than spending.
So should we expect the situation to get worse, or improve?
Well this really depends on how proactive your business or company is being with their finance. If you see yourself struggling and you find that outgoings are becoming too high - then bringing in a specialist may help. After all, if we are to believe the myth surrounding the American Airlines "Olive Trick" the solution may be something so simple that we just can't recognise or identify it on our own.