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Lean is in as companies are weighed down by rising costs

Lean is in as companies are weighed down by rising costs
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First Published: Mon, Aug 18 2008. 11 57 PM IST

Trimming fat: Singapore Airlines has introduced lightweight trolleys and cutlery to reduce weight and costs. (Photograph: Jonathan Drake / Bloomberg)
Trimming fat: Singapore Airlines has introduced lightweight trolleys and cutlery to reduce weight and costs. (Photograph: Jonathan Drake / Bloomberg)
Updated: Mon, Aug 18 2008. 11 57 PM IST
Mumbai: Cost cutting is such a priority in the current economic scenario that some firms are literally “trimming the flab” and becoming “leaner.”
Since weight translates into cost for most products, these companies are reducing the weight of their products.
And every gram counts.
Trimming fat: Singapore Airlines has introduced lightweight trolleys and cutlery to reduce weight and costs. (Photograph: Jonathan Drake / Bloomberg)
Maruti Suzuki India Ltd, the country’s largest carmaker, recently launched its “one component, one gram” initiative that requires every parts supplier to make lighter components—even if these are lighter only by a gram. A Maruti executive, who declined being named, said the move could benefit the sector since many car makers share vendors.
Most automotive companies are looking to shed weight, said Piyush Parag, associate vice-president at Religare Research, an arm of brokerage Religare Enterprises Ltd.
Packaged foods and consumer goods companies, too, are looking to reduce the weight of some offerings rather than hike prices. And, airlines are looking to fly “lighter.”
Welcome to a lightweight economy where marketers across categories strive to deliver products that are lighter and, thus, cost less to make.
“Product downsizing in the face of inflation in order to maintain retail price points has long been used by food companies, notably manufacturers of candy,” said John Quelch, a professor at Harvard Business School and co-author of Greater Good: How Good Marketing Makes For Better Democracy.
For airlines, lighter flights mean less fuel burned. Given the current price of jet fuel, it means less money spent. An aviation analyst, who did not wish to be named, said carriers have become stricter about baggage limits. And some have reduced the number of magazines they carry or are replacing heavier cutlery and equipment with lighter alternatives.
Says a spokesperson for Singapore Airlines, “We have introduced lightweight carts and serviceware on board our new aircrafts such as the A380 superjumbo and we are progressively rolling it out to the rest of our fleet.”
Again, by removing six seats, JetBlue Airways Corp. cut the A320’s weight by some 411kg.
Do these measures help?
According to a recent study by audit firm KPMG International, a US airline shed 90kg to a plane by removing seatback phones from some aircraft, translating into annual savings of at least 12,886 litres of fuel. The study didn’t name the airline.
The weight reduction tactic is just made for India, said one advertising executive.
In India’s price sensitive market, raising prices isn’t always an option, said Anil Nair, president, Law and Kenneth Pvt. Ltd. “It’s safer to trim the excesses, more so in the lower-priced product offerings.”
“A leading airline in India doesn’t serve sugared yogurt any more in the economy class, unless you request for it. Five star hotels have sliced off complimentary breakfast from their low priced value packages. And some cars now come without wooden panelling.”
The weight tactic is most evident in consumer goods. Nikhil Vora, an analyst at IDFC-SSKI Securities Ltd said packaged foods and consumer products companies could reduce weight while maintaining existing passenger sizes.
“Soap manufacturers have done it all along as reducing a gram or two will hurt no one and no one’s going to notice it. Most consumer goods companies have been known to decrease grammage without letting the consumer know. (And) this was being done even when inflation had not set in.”
Reducing weight without reducing pack sizes isn’t a new tactic, said Quelch. “Breakfast cereal companies have used this approach. It is up to consumers to be vigilant.”
Prasanth Mohanachandran, executive director, digital services, Ogilvy and Mather India Ltd, said that as a consumer, he felt that the weight of Maggi noodles had gone down even in its existing packs. A spokesperson of Nestle India Ltd said, “With rising input costs and our emphasis on maintaining high quality, we endeavour to price our products in a manner that balances value for money and convenient price points.”
Still, it is a fact that some companies have kept prices constant and reduced quantity, said M.G. Parameswaran, executive director and CEO, Draft FCB+Ulka.
“Instead of paying Rs4 for a 100gm pack of biscuits, the consumer is now paying Rs4 for 92gm; soaps have been offering smaller packs such as 45gm at Rs5. I am sure shampoos will follow. The consumer is aware she is getting less, but is happy that she can still set out to go to the shop with Rs100 and get home with the same basket of brands, albeit in smaller packs.”
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First Published: Mon, Aug 18 2008. 11 57 PM IST