Operations management: As an Operations manager, how do you approach budget and cost cuts?

it is important to apply the principle of lean which focus on improving process based on eliminate waste sources such as distances, time, labor, machines, etc.

Also, not all the time the causes of waste related to lack of technical skills. I think we can manage the whole process "either production or service" and improve the it which defintly reduce cost and increase profit  by enhancing the non-technical skills of the team.

For Budgets a rational approach is to use Zero Based Budgeting and or flexible budgeting process. Both these budgets inherently provide a base position to start of the work and one can align cost targets accordingly. In utilizing these 2 approaches costs cuts are part of the plan and can happen in step. This eliminates the need for cost cut programs that appear if the budgeting technique used was like a rolling forecast or a static budget. Montly review against P/L also allows to adjust the programs and avoid any nasty surprises. 

In case of the standard static budget or rolling forecast is being used, one must ensure that the targets are set according to the frequency of occurance and must be as a thumb rule within 1 to 2 standard deviations.  Choosing averages to mark budgets and cost cuts are just invitation for failure.

Tactially speaking this means as an example 

Using the right metrics > using the lowest landed cost supplier with a 80% service level will result in a start gap of 20% on your service level. This is met normally by inventory investments. In addition supplier delays result in added cost of expediting and working on the problem that is accounted in person overtime in SG & A as well as direct labor Overtime. 

Alternative is to calculate the total cost of ownership of the product and use this as a means to negotiate with the vendor. This will immediately make the lowest landed cost supplier more expensive when compared with a total cost supplier with a service level of 90% that may have been labelled high cost or medium cost before. 

So when you choose a total cost supplier you are actually optimizing the spend and cost reduction. 

Being a operation manager, choose and tender the best and updated product with spectification.

Mark the lowest price and neogicates the cost of the product with vender.

In regards to the given questions, I will think it in a positive way, the budgets and cost cuts. In every company especially in operation cost cutting is always be given but it should not affect the approved company policy and procedures in handling operational functions and work performance. 

We can check below list;

1. We can re audit our procedures to make it more even with the operational cycle.

2. Measuring performance of each operational staffs or effective use of resources and softwares.

3. Allowing staff do thier job easily and comfortable to minimized issue in safety 

4. Making things done on a right given time, as we always be reminded that every seconds counts in operational perspective for our clients.

It has to be conducted with some steps as following:

1- Measuring performance and evaluate the change needed.

2- Analyze the root cause. 

3- Study the impact that will effect on other metrics such as quality,time,resources...etc

3- Make an official  change request to all related stakeholders with the expected result.

4- Gaining approval and implementing the change needed with verification observation. 

So far i think budget control and its effective use is only possible if you follow few good steps for cost cuts

1- Contineous Cost control

2- Cost Reduction tools and methods ideally used

3- Right People/Skill for right job

4- Effective use of resources 

With competitive environments and increasing pressures budget and cost cuts are a reality. How we as managers can handle this. Continuous improvement in operations and productivity is one of the most important factors. Sales volumes are another opportunity. Opportunities in line efficiency, reduction in fixed over heads, labor costs are few critical areas to impact.