Saturday, November 29, 2008

Manufacturing cuts in Japan

Manufacturing cuts are a rule now. Check this link that talks of cuts in the supposedly super efficient companies from Japan.

The production cuts would of course be useful only if they create a substantial reduction in the costs. For companies with a high level of fixed costs in the form of expensive machinery or pension expenses, the cuts would not help much. They might be better off in reducing prices and hoping (and praying) that the demand picks up.

I am sure there would be other things to do. Companies of course have a reserve fund that they can use to survive in such periods. But there should definitely be other techniques that manufacturers can leverage on in these hard times. Reducing production and firing people seems to be a knee jerk reaction. I do not have a solid proof on what I am saying, but I hope I can create a complete picture in the next few posts.

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