How to reduce Operation

Costs
Pharm. Ameobi L.E.
(Business Operations Manager OEHNG)

Making Healthy Enjoyable

 OUTLINE

» DEFINITIONS.

» TYPES OF OPERATION COSTS.

» HOW TO REDUCE OPERATION

COSTS.

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 How to reduce operation costs.
Definitions
» Operating Costs: are the costs incurred to maintain the
day-to-day operations of a business. These include both:
» Costs Of Goods Sold (COGS), also known as Cost of Sales,
which are the expenses directly tied to the production of
goods and services e.g. direct material costs, direct labour,
rent of the plant or production facility, benefits and wages
for the production workers, repair costs of equipment etc.

» Operating Expenses (OPEX), also known as Selling, General

and Administrative (SG&A) expenses, which are the costs of
doing business e.g. rent, equipment, inventory costs,
marketing etc.

» Operation cost = COGS + OPEX

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 How to reduce operation costs.
Types of Operation Costs
Fixed Costs: A fixed cost is one that does not change
with an increase or decrease in sales or productivity
and must be paid regardless of the company’s
activity or performance e.g. salaries etc.

Variable Costs: Variable costs, like the name

implies, are comprised of costs that vary with
production. Unlike fixed costs, these increase as
production increases and decrease as production
decreases e.g. raw material costs etc.

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 How to reduce operation costs.
Operation Costs may be reduced via:
» Efficient inventory management systems:
Having a sound inventory management system
directly affects a business’ costs as it leads to less
over stocking and reduces the chances of obsolete
stock that cannot easily be sold.
» Changing suppliers : It is important to
periodically source for new suppliers to keep
pricing in check but when choosing a new supplier
ensure they provide consistent quality, provide
adequate service and ensure there are measures put
in place to safeguard against price increases e.g.
getting price break or volume discount from the
supplier.

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 How to reduce operation costs.
Modernising the marketing strategies via:
» Referrals: a recommendation from a current customer can
work better than traditional marketing.
» Networking: Clients are more likely to hire a business with
a face they recognize. Telling your brand story and what
goes on behind the scenes can create a lasting impression.
Take the time to form a solid relationship with clients.
» Creating a robust social media plan: capturing new leads
with valuable content related to the business on platforms
that suit the business best.
» Maximising the use of virtual technology as a means of
daily advertisement e.g. content creation via social media
apps.

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 How to reduce operation costs

» Maximising channels that can increase profit at

almost no cost e.g. for OEHNG’s health
promotion aspect by diversifying into
telemedicine, virtual health talks, brand
partnerships and sponsorships, etc.
» Growing employees' skills e.g. via online
courses, training or skill acquisition sessions etc.

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THANK YOU!

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Making Healthy Enjoyable