Cost Cutting or Cost Transferring?

March 2010 – We have had three meetings in Temerluh and the quorum consist of four managers and four Union members from Temerluh, one Union HQ representative from K.L. and one Industrial Relations Officer from Kuantan. Temerluh was the most convenient meeting point as it involved traveling by only two parties or 20% of the quorum. Our fourth meeting scheduled in Temerluh was cancelled because the Government decided that it needed to cut cost and the Industrial Relations Officer from Kuantan was no longer allowed to travel.    A new date for the fourth meeting was set to be held in Kuantan. From two persons doing a day trip, traveling about a 260 km round trip each, suddenly we have 9 persons traveling  to Kuantan in 3 separate convoys, with two groups clocking a 260 km round trip from Temerluh and the KL representative doing an overnighter and a 520 km round trip.     This is a classic case where a cost cutting exercise by one party had multiplied the actual cost by more than three folds.      

Traveling doubled as the savings made by the IR officer has to be compensated by traveling by all other parties. Other than the monetary cost, the increased traveling also means an increase in air pollution       

Travelled Distance (km) Temerluh Kuantan Difference
KL Union Representative 260 620 260
Managers 0 260 260
Union Staff 0 260 260
Industrial Relations Officer 260 0 -260
Total Distance 520 1140 520

Tolls charges also magnified by two folds.   

Toll Paid (RM) Temerluh Kuantan Difference
KL Union Representative 28.00 55.20 27.20
Managers 0.00 27.80 27.80
Union Staff 0.00 27.80 27.80
Industrial Relations Officer 27.80 0.00 -27.80
Total Toll Paid 55.80 110.80 55.00

 The additional traveling cost and toll cost is nothing compared with the increased amount of man hours spent to attend the meeting in Kuantan. When the meeting was held in Temerluh, the total man hours spent for traveling was 8 hours. In comparison, a total of 52 man hours has to be spent to accommodate the meeting in Kuantan. This is a 550% increase in precious time wasted. Time loss would equal a monetary. 

Traveling Time (hours) Temerluh Kuantan Difference
KL Union Representative x 1 4 8 4
Managers x 4 0 16 16
Union Staff x 4 0 16 16
Industrial Relations Officer x 1 4 0 -4
Total Hours Spent 8 40 32
Spent Over Night (hours) Temerluh Kuantan Difference
KL Union Representative x 1 0 12 12
       
Total Time Spent 8 52 44

The outcome of one organisation’s attempt to save cost, increase actual cost by many folds.      Therefore, any cost cutting exercise has to be thought out carefully.      

Are you really cutting cost or are you transferring the cost?

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