Cost-Saving Ideas for Applying Business Acumen
May 26, 2010
Companies are trying to save costs in big ways—such as reducing capital expenditures, eliminating unprofitable product lines, and in all-too-frequent cases, reducing their numbers of employees.
However, many large companies over the last few years have made a significant impact on their bottom line (and their Earnings Per Share, thus their stock price) by making little changes spread consistently over their larger operations. These little daily savings add up to big savings over time.
United Parcel Service (UPS): Since 2005, UPS has saved at least $8 million a year—not counting many other benefits—simply by having its drivers (the kind that pilot its trucks…) make fewer left turns.
Think about it. While turning left, time is wasted and fuel is burned waiting for oncoming traffic to clear; fewer packages can be delivered per day because of the time spent turning left, thus reducing revenues. And statistically the risk of accidents (and their costs!) is increased due to the added complexity of crossing one or two lanes and second-guessing oncoming traffic. Also, right turns don't require fuel-consuming jackrabbit starts, to take advantage of a brief gap in traffic. Tests by UPS also determined that only 10 seconds of idling consumes more fuel than stopping and restarting the engine. Company policy is to shut off the engine while the driver makes a delivery; governors have been installed that shut down the engine after five minutes' idle time.
In 2007 UPS operated more than 95,000 trucks delivering over 15 million packages a day across 200 countries. By making fewer left turns, the company reduced travel by 29 million miles and saved over 3.3 million gallons of fuel, saving over $9 million in expense. In addition toxic carbon dioxide emissions were reduced by 31 million metric tons.
How did they do it? By developing sophisticated computer software using travel-optimizing “package flow technologies.” The software analytics include calculating early each morning the maximum-efficient routes drivers should take for their day’s deliveries, to balance reducing left turns commensurate with not making ridiculously circuitous right turns, plus other considerations. "The routes are planned out in loop formation, to complete the route and get you back, making as many right turns as possible," says UPS spokesperson Ronna Charles Branch.
Con-way Freight: Reduce speed by only 3 mph and save significant money? Con-way Freight (a subsidiary of Con-way, Inc., a $4 billion freight and logistics management company with operations on five continents and traded on the New York Stock Exchange) lowered the maximum speed of its truck fleet from 65 to 62 mph. Management estimates the company will save upwards of 3.2 million gallons of gas. At an average $3.00 per gallon for diesel fuel, that’s $9.6 million, almost 10% of Con-Way’s net income in 2008. And fewer stops to refill the tank offsets the time loss in driving slower.
Company: What can you do to encourage “left-turn cost savings” in your company? You might not be in the freight industry—but what little things can you do, and influence your co-workers to do, that will add up over time to significant daily and yearly savings, if repeated all around your organization? What do your customers care about and are willing to pay for as added value—and what are you doing that really adds no value to customers, but adds unnecessary costs that erode your bottom line profitability?
Hop on Facebook and tell us what cost-saving ideas you've considered or seen in your workplace.