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 Media Coverage
● Nikkei MJ Newspaper (published August 27, 2010)
Even though JFR Consulting's new company had just been launched, we were interviewed by reporter Daisuke Harashima under the headline "We asked the president of the new company established by J. Front. Cost reduction, specific instructions." We were featured prominently in a large 7-column feature on page 5, and received some very generous comments in the "Reporter's Eyes" column.
● Weekly Diamond (published October 8, 2010)
Reporter Ayako Suga gave us a concise and concise introduction under the headline "I teach the secrets of low-cost management."
● "Sales Innovation"〈Published in the November 2010 issue〉
A two-page feature was created with the title "President Doi Kazuo's Tips on Cost Reduction - Changing Rules, Processes, and Authority to Convert Fixed Costs into Variable Costs", and the reporter Nishikawa Tatsuichi used charts and graphs to summarize and introduce my ideas very well.
● "Turnaround Manager"〈Published in the November 2010 issue〉
"Turnaround Manager", a monthly professional magazine on management support practices published by "Bank Training Company", has kindly created a five-page feature with the title "Cost Reduction is a Change in Values ​​- Turnaround Undertaken by Reduction Professionals", thanks to the special generosity of editor-in-chief Nakayama Satoshi.
*An excerpt from the article is below
Published in the November 2010 issue of "Turnaround Manager," a professional magazine for business support
Cost reduction is a change in values
~Turnaround tackled by reduction professionals~
The first thing companies focus on in management reform and business revitalization is cost reduction, and it seems that all companies are working on it thoroughly, but in reality, there are aspects where cost analysis is lacking, and even if reduction plans are made, they are not implemented. In other words, there is still room for cost reduction, and many companies can improve their performance further if they make proper efforts.
JFR Consulting Co., Ltd. is a specialized company for cost reduction support established by J. Front Retailing Co., Ltd. Kazuo Doi, who has been appointed president of the company, will go into target companies and teach them the cost reduction know-how he has been working on at Daimaru Matsuzakaya Department Stores. We will ask him in detail about his specific efforts. (Interviewer: Satoshi Nakayama, Editor-in-Chief, Ginko Publishing Co., Ltd.)
"Cost reduction remains an important theme"
Editor-in-Chief Nakayama: Cost reduction is the first area to tackle when improving management or revitalizing a business, but does its importance remain unchanged as the environment changes?
Doi: It is true that the business environment has changed drastically in recent years.
Take the department store industry, which is my original field, for example. Sales have been declining steadily, falling below the previous year's figure for 12 consecutive years, and in 2009 they fell below 7 trillion yen for the first time in 24 years since 1985, and some managers even say they will shrink to the 5 trillion yen range in the future.
What this means is that "the current business structure cannot endure."
In other words, from now on, new growth will not be achieved unless the business structure itself is changed, and measures that are in line with the previous business structure, such as "cost reduction," will not lead to essential revival.
We basically share this view.
However, the reason I established a company to support "cost reduction" is because I believe that there are still many companies that can secure operating profits by reducing costs.
In particular, for companies whose daily performance is closely watched by the market and who must achieve promised operating profits,
I believe that the need for cost reductions that directly lead to increased operating profits remains strong.
The reality is that while the importance of changing the business structure itself is recognized, it is difficult to tackle due to time constraints.
That was the reason why I started working on cost reductions at Daimaru and Daimaru Matsuzakaya Department Stores in the first place.
Nakayama: Please tell me the details.
Doi: I first got involved in this field in 1999.
The year before, in 1998, Daimaru had implemented early retirement for 700 employees, which, assuming an average labor cost of 10 million yen per person, reduced costs by 7 billion yen per year.
As the head of sales planning at Daimaru at the time, I thought that this would improve business performance.
However, in the first quarter (March-May), sales were falling by 2 to 3 billion yen each month compared to the target, and we realized that if this continued, all of our 7 billion yen "savings" would be wiped out, and we would end up with a decrease in profits rather than an increase.
In that situation, the only options were to either "increase sales or reduce expenses," but even if we wanted to increase sales, at that point in time, there were no significant measures we could come up with.
So I thought, "Let's try to take a bite at expenses."
In fact, up until that point, everyone had generally recognized that expenses needed to be reduced, but no specific initiatives had been put in place to determine which expenses to reduce and by how much. Everyone had simply left it all up to the store managers and executives on the ground. All I did at the time was explain that business performance had deteriorated considerably in March-May, that the outlook for June-August was also poor, and that if things continued as they were, operating profits would fall by this much, so expenses needed to be reduced considerably.
The details of the reductions were calculated on the computer the day before the meeting where the report was given, and were things like eliminating part-time workers and reducing newspaper advertising costs.
Even so, it was only about 1.5 billion yen in scale, but the president immediately decided to implement the details,and from then on I was involved in cost reduction.
The key point when I first started working on it was that I took the stance of expanding the role of the Sales Planning Department to manage the operating profits of the entire company.
In other words, up until then the management of sales expenses had been left to each department, and the organization was, so to speak, vertically divided.
As a result, when it came to cost reduction targets, each department and each store started saying things like "We're doing it right" or "It's impossible in the first place."
Since cost reductions would not progress like that, we decided to have the Sales Planning Department manage the sales expenses of the entire company in one place.
After repeating this over and over, we realized that we could get involved from the budget creation stage onwards.
It was like a "business sorting out."
Being able to manage the expenses of each department means being able to point out things like, "Last year we spent this much, but this year we should be able to spend a little less." As a result of taking these measures quarterly, the work of cost reduction at Daimaru Matsuzakaya Department Stores has finally begun to be recognized within the company. As for the most recent results, since the merger of Daimaru Matsuzakaya in September 2007, by fiscal 2009 they have achieved a total cost reduction of 26.4 billion yen, or 12%. And now they have decided to establish a company to provide this experience to outside parties.
"Structural reform leads directly to cost reduction"
Chief Nakayama: Could you please give us some more specific points regarding the cost reduction method?
Doi: However, I think you understand that no matter how many times you tell people to "try your best," expenses are not likely to go down.
Our conclusion is how to change the structure.
And there are three points to changing the structure.
First, "change the rules," second, "change the process," and third, "change the authority."
Changing the first rule means that, for example, simply saying "reduce overtime" is no good.
You have to prohibit overtime by rule.
In other words, you need to clearly define rules such as days to go home early, no overtime days, or turning off the lights in the entire building at 7 p.m.
It's meaningless if there are "unspoken rules" or if some people know about them but others don't.
Second, change the situation where rules differ depending on the department.
For example, in a department store, each store is like a department, but because they are far from the headquarters and have their own long histories, they all have their own "styles," just like the masters of tea ceremony or flower arranging.
In other words, the rules are all different.
This situation creates inefficiencies in many areas, so it must be resolved by unifying the rules.
The second process change is, as a simple example, changing the ordering process.
Giving new vendors the opportunity to enter the market and compete with existing vendors will result in cheaper and better prices and quality.
For example, Daimaru outsources its copy machines to Company A, which cost 5.5 yen per page in 2003.
When the person in charge pointed out that this was "quite expensive," the person said, "Company A's technology is specialized, so it can't be helped."
However, when the copy machines at Daimaru's training center were updated, the person in charge asked Company B for a quote, and found that the price was 3.7 yen per page.
Then the company decided to "switch all of the copy machines at the headquarters to Company B," but then Company A said it would be 3.5 yen per page.
In other words, the person in charge had not made any approach up until now.
In another example, the ordering department was centralized.
Rather than each store placing orders individually, we had the person best at ordering place the orders in one place.
Similarly, each store used to create their own expense budgets, but we decided that my department would create the budgets and have each store implement them.
This was because we thought that we could eliminate the unnecessary work of formulating budgets at the store level.
In this way, the work process was changed so that the role of the headquarters was to exercise central control over costs.
In other words, the headquarters was a department that brought together all the strategic functions, ordering functions, and other functions that could be consolidated, and the stores were departments that focused on how to perform on-site and daily work as efficiently as possible.
There are many different types of work processes, but if we work on them with the awareness of "changing" them,
it will of course lead to structural reform itself and will be highly effective in reducing costs.
The third point is to change authority. As I just mentioned, if authority is dispersed among various departments, prices and specifications will differ for each department, which will ultimately lead to waste.
This means that we should eliminate the dispersion of authority by gathering everything that can be gathered in one place or by creating specialized functions.
"Evaluation of the person in charge is important"
Chief Nakayama: Any other points?
Doi: Expense personnel often do not get the "spotlight" and I think this should be changed.
Sales and planning personnel often get the spotlight, but other departments, such as property management, accounting, logistics, and even departments that handle supplies, are not highly evaluated no matter how hard they try.
Despite this, they are severely reprimanded if they make a mistake.
For example, a water leak is a big problem, but not having a single leak for 10 years is not highly evaluated.
I think the same is true for the expense department.
Therefore, the expense department needs to contribute to operating profits by using expenses as efficiently as possible, and at the same time, a system is needed to properly evaluate this.
It is true that sales and operating profits are important factors for a company, but reducing expenses can also contribute to operating profits.
Management must clearly evaluate this.
This will change the motivation of the person in charge.
If the expense manager is properly evaluated within the company, when the company's sales decrease, the expense manager will seriously consider "where to cut expenses to make up for the decrease in sales and secure operating profits."
If this is not the case, the expense manager will continue to accept high expenses for reasons such as "we cannot lower the quality," and will further come to think that the budget should be used precisely like in the government.
To avoid this, the hidden achievements of the expense manager who steadily repeats efforts such as high quality and lowering prices must be properly evaluated.
I would like you to reaffirm that "revenue decrease but profit increase," such as achieving operating profit by reducing costs even if sales decrease by 3% or 5%, cannot be achieved without a highly motivated expense manager.
Nakayama: As mentioned at the beginning, if sales are on a downward trend, the cost reduction side will have to make the reductions on the upward trend in order to achieve the goal. How do you deal with this? Doi: When sales are falling, sales strengthening measures are usually introduced, but my opinion is that "if sales are worse and strengthening measures are effective, then they should be done from the beginning." Of course, it's best if the strengthening measures work, but as a person in charge of expenses, I try not to trust them too much. This is my experience at a department store, but I feel that if you look at the moving average of sales over a three-month period, you can roughly grasp future sales trends. Therefore, for example, if sales are down about 5% on the three-month moving average, you have to implement cost reductions with the assumption that sales will continue to decline at a 5% level. If it's better than that, then it's fine to have increased profits by that amount, but even if it's bad as the trend is, you have to think about securing operating profits properly. Since we are proceeding with cost reductions based on pessimistic assumptions, we will inevitably encounter resistance, but we must be prepared to tackle the issue with the understanding that if sales decrease, we will have to reduce expenses accordingly.
"There is no limit"
Editor-in-Chief Nakayama: Some people say, "We've done a lot to cut costs, and we're reaching our limit," but what do you think?
Doi: What do you mean by "limit"?
You can't judge that without actually seeing it.
Of course, there will be cases where the end result is that we've reached our limit, but conversely, there are of course cases where there is still room for improvement.
If you look at cost reduction efforts chronologically, you might think, "We've been doing it every year, so we've reached our limit," but that's a different perspective.
The point is that we need to check whether the costs are reasonable from a market perspective.
That requires benchmarking.
However, it's difficult to obtain information on benchmarks for costs, so if the person who knows the most about it says, "We're at our limit," that tends to be the right answer.
That's why you need to pay attention to what the person in charge is thinking when they say "we're at our limit."
From this perspective, the key is whether the organization is evaluated for cost reduction.
The idea of ​​changing the specifications of the parts that are incurring expenses is also important.
In the end, as long as the end user does not have any problems and the goal is achieved, any means is fine.
For example, we used paper to dispose of toilet waste, but with the advent of shower toilets, we found that it was possible to dispose of it comfortably.
At that time, we decided to use water (= shower toilets) because water is more comfortable and less expensive than paper.
However, in reality, the constraints that we have used up until now, such as "it has to be paper," often lie unconsciously.
In other words, it is necessary to remove these fixed ideas and constraints and take a stance of changing the way we send things to overcome the idea of ​​"we're at our limit."
"Pursue goals at monthly general meetings"
Chief Nakayama: It is very important to manage progress toward cost reduction goals, but what are your thoughts on this?
Doi: We believe that the most important thing is to repeat progress management diligently, starting with the monthly "cost reduction progress meeting."
The "progress meeting" is attended by people in charge of labor costs, property management, logistics, supplies, etc.
The important thing is not to have a vertical meeting where only the store manager or the head of expenses is asked to attend, but to have each person in charge attend and make it a place for vertical and horizontal discussion.
They are gathered together every month to report on the progress of the goal.
If the goal is not reached, the cause is identified and what should be done is discussed, and the managers in each department solve the problem on the spot.
In addition, since the staff from each store attends, they can obtain know-how from the staff from stores that are doing well, and of course, this is shared with all stores.
Then, they promise to put into action the conclusions reached there.
Since this promise is made in front of everyone in attendance at the meeting, it is unlikely that the same mistake will be repeated next month.
Having these meetings every month will create a strong desire to increase operating profits, which will lead to the achievement of the goal.
*The following is an abbreviation for an introductory article on JFR Consulting, Inc.

 

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