Technology offers the answer to much needed cost savings
Lim Shu Chinq, 20 July 2020
Just when our South East Asian region is supposed to begin the recovery and reopening phase from the disastrous COVID-19 lockdown, we are yet again being bombarded with news of further retrenchments by local conglomerates. This time from Resort World Sentosa (RWS), which by the sheer volume of its employee number is certainly one of Singapore’s biggest companies. While we have all heard and expect job cuts in the aviation sector due to the fear of flying sweeping mankind these days, what makes the RWS retrenchment more striking is that for the 1st time in its illustrious 55 years history, the parent company of RWS, Genting Group has to exercise retrenchment for its Malaysia and Singapore branches.
News like this make for bad readings for the majority of SME that makes up the vast majority of private-sector employment for the general public. In this article, I would like to delve a little deeper into ways that employers out there can safe some much needed money to avoid the dreaded job-cuts that seems inevitable.
Hiring and allowance freeze
While cutting salaries of staff seems the easiest way out, it’s really not advisable and should only be used as a last resort. This is because extensive studies have shown that staff going through salary cut generally have a worst time struggling to adjust to their new life post-salary deduction than those who have been unemployed for a longer time. Staff going through salary-deduction would exhibit lower morale and lower productivity and the negative vibes going through the organisation is rather contagious and would certainly affect the long term growth prospect of the companies concern.
While salary cuts are not advisable, hiring freeze and freezing of certain allowances benefits for certain staff is more acceptable. Staffs who are given fixed travel allowances should be asked to forgo the allowance and instead harness the power of technology by using apps such as Zoom or Google Meet to meet clients or do products presentation. The amount saved could be substantial especially when the travel involves flight to faraway destinations. Entertainment allowances could be eliminated or reduced as well in the process as online meet-ups or meetings would mean there is no longer any need for hosting expenses.
Likewise, by implementing hiring freeze, employer should take advantage of all the online courses available to retrain and educate their staff to be better equipped to do cross-section work. An admin staff could be trained to handle accounts as well and a sales staff could be trained to handle IT related work for the company as well. Therefore, there is less need to hire additional staff while at the same time, productivity and efficiency of the organisation would increase as most, if not all employee would surely opt for more work for similar or additional salary than a salary cut for similar work rendered.
Companies should also look at various ways to cut their so called “fixed-cost” through the power of outsourcing, renegotiation and research. For example, is it really necessary for a company to possess numerous company cars with all the maintenance, fuel and capital cost involved to do product delivery when there are reliable and much cheaper services like GrabExpress to deliver your goods for you? As for renegotiation, in the current economic climate we are in, it’s pretty much a given that other companies would rather earn less from your company than earn nothing so every negotiable items should be explored. The main supplier of your company’s blank paper, the daily cleaning service, the supplier of raw materials for your company’s production and so forth could all be renegotiated to your advantage. As the age old business phrase goes, well “It’s nothing personal, it’s just business”.
As for the research part, every employers knows electricity cost is one of the top cost of operating a business apart from staff compensation and rental of business workplaces. However, have we been taking proactive ways to safe on electricity cost? In the humid and hot weather climate of Malaysia and the South East Asian countries, air conditioning is a must and every workplace usually has plenty of units installed which is open throughout the duration of their operating hours.
Take an average whereby operating each 2.0 HP (horsepower) unit of air conditioning 8 hours a day for 30 days would cost RM105.00 (based on 2015 TNB calculations), a typical office with 10 units of the said air conditioning would incur RM1050.00 per month in electricity bill from those air conditioning alone. By switching all their old units of air conditioning to the latest inverter system air conditioning for similar HP, they could save up to 40% from their bill which amounts to RM420.00 per month. At a cost of roughly RM2300.00 per unit for high quality 2.0HP efficient Inverter air conditioning unit, the company would have to come out with RM23,000.00 for 10 units which can easily be paid in interest-free installments. Supposing the old units are traded-in at a conservative rate of RM600 per unit to the selling company, it would take less than 3 and a half years to cover back the switching cost. In effect, the extra cost being save pays for the instalments of the new air conditioning and beyond the 3rd year, the savings for the company will start to be rather significant.
This savings method become even more significant for factories needing high voltage for long periods. Typically, its normal for these factories to incur electricity bills in the 5 to 6 digit range per month. One often overlooked power consumption unit is their factory’s air compressor units. Overtime, performance of their air compressor units deteriorates and often times, it is left untouched until major repair is needed. However, by switching their old air compressor units to newer ones with Inverter Technology, they can easily save enormous amount in their electricity bill. An Inverter Type (or known as Variable Speed Driven) Screw Air Compressor typically saves between 35% to 50% electricity over regular Screw Air Compressor. At a conservative factory average usage of RM15,000.00 electricity bill a month from their air compressor units alone, a 35% savings equals to RM5,250.00 savings a month and at that rate, the switching cost of a new Inverter model 50HP air compressor costing an average RM50,000.00 would only take 10 months to earn back the capital invested. Beyond the 10th month, it’s like using the machine for free with great savings to boot. Talk about money well spend! Just be sure to look for experts in air compressor system in order to achieve full efficiency.
So as we can see, there are indeed many ways for each and every companies big or small to safe much needed money over the long term. In fact, failure to change with the times could spell disaster in this era of economic uncertainly.
Published : 20-Jul-2020