Cutting costs and changing mindsets

Case 8.1
Pg 129-131

CUTTING COSTS & CHANGING MINDSETS

Together we can was the new maxim being heard across Ranbaxy Laboratories Limited ,Indias largest pharmaceutical company. The promise was made more than a year back when project CRUSOE was born. Project Crusoe stands for Creatively Releasing, Unleashing Substantial Operating Efficiencies.

Why was it started?

1. It was started as a cost efficiency exercise. But soon positioned itself as a change enabling Human resource exercise in the company. 2. It was initiated for realbusiness benefits. 3. It was started for identifying those sectors that needed a re-look and enable a positive change in these sectors.

How was project Crusoe implemented ?

1. It was implemented in nine phases. 2. Each phase incorporating four projects over a period of 3 months. 3. The project will concentrate on various important areas such as: # raw material sourcing. # marketing. # distribution. # research and development. # packaging. # ads and promotions .

How was project Crusoe implemented ?

4. The director of the company was appointed as the team leader for the project on a full time basis. 5. The project Crusoe consisted of many waves, each concentrating on different sectors. 6. Each wave comprised of 20-25 executive members with the youngest member aged 21 and the oldest aged 50. 7. Each Crusoe crusader was responsible for taking the ownership of the project and its implementation.

Works of the team

1. Challenge everything that was accepted as norm. 2. The members must benchmark, question, examine (ponder), suggest and implement better systems within limited time. 3. The team members had weekly reviews and debates and constant brainstorming generating many new ideas which gave birth to concepts that could be practically applied to business & not just discussed and shelved.

The Initial step

1. Theoretical concepts and mental suggestions were experimented with new technologies such as online forward auction and reverse auction .
The seller puts an item up for sale and Multiple buyers bid for the item, and one or more of the highest bidders buys the goods at a price determined at the conclusion of the bidding.

Forward auction:

Reverse auction:
A buyer puts a contract out for bid and multiple sellers offer bids on the item, competing to offer the lowest price that meets all of the specifications of the bid.

RESULT:

It re-affirmed that e-business delivers cost reduction, efficiency and also improves velocity of transactions, delivering improved performance. It was proved that e sourcing produced 7-8% savings in the cost incurred.
Shortcut to 3898283_f520 (1).jpg.lnk

The Initial step

2. The company also realized that cutting down cost can be effected if there is a cultural change within the business. Project Crusoe is infusing a better culture cause when there is no pain (no downsizing of employees involved), everybody is enthusiastic to give their best for their company.

Functions of the waves

The core focus of each wave was to challenge the cost of business operation. While some waves focused on bringing about cultural change in the way of doing business. Some other waves moved a step ahead and they brought a change in the business models. Four such waves identified 5 different areas of expenditure. 425 projects were identified which were likely to generate a savings up to 10%.

Implementation
1. The 1st step of implementation started at employee level, so as to change their mindsets and attitudes towards the various changes brought in by the projects results. The initiative of this was taken by Power & Fuel team who created innovative posters to communicate to every Ranbaxian, the benefits of saving power and fuel, even in their personal lives.

2.

Success of the project in the short run

Short Run:
The short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. And also the variations in outputs are possible only to a certain limit. # The success of this project in short run is very minimal. Though project Crusoe would not be a complete failure it has only negative success during the short run.

Success of the project in the short run

1. The team CRUSOE has identified 425 projects which are likely to generate 10% savings. But it is not possible to complete all these projects within a short span of time. 2. The cultural changes at the organisation could not be put to practice in a very less time. 3. The change in the business models and strategies cannot be effected in a short term period itself. 4. The Project Crusoe also experimented with new technologies and obtained satisfying results out of it. But the level of technology is assumed to remain unchanged in a short run.

Success of the project in the long run

Long Run:
The long run is a period of time in which the quantities of all inputs can be varied. Hence in long run all the cost are variable and none are fixed. # The project Crusoe in a long term would have achieved most of the expected effect, hence it has more chances of being a success in the long run.

Success of the project in the long run

1. Any major cultural changes to be effected in an organization can be achieved only by a long term project. 2. Project Crusoe experimented with new technologies and obtained satisfying results through it . Such technologies along with the methods involved in it can be implemented only in a long term project. 3. A large expenditure for the assets, land and man power can be provided only in the case of a long term project. 4. Initiating multiple projects in different stages and making them successful is only possible during a long run. 5. The testing methods involved in proceeding with the project is comparatively cheaper in a long run project than a short run project. In order to bring even a project of this level into existence it requires a long running company which has already stabilized itself in the market.

Can we help you ?!