OIL MANAGEMENT FOR BUSINESS PROFITABILITY

Profit is the only motive of any commercial organization, whether it be a Public Limited Company, a Partnership Company, or a Proprietorship Company. Profit is the result of producing an item or offering any service at the lowest cost and realizing the best sales price, as the market decides the usual price and is not in the hands of the company. Profit is the function of demand and supply. If a company has to exist, then it has to follow the market and only focus on reducing costs.

- By V.S. Dave

Only the following three resources are available to the company to reduce the cost.

1. Capital

2. Workforce

3. Plant and Machinery

Thus, the company is left with only three options to control the cost.

1. Reduce the cost of capital – Typically, it refers to the interest on borrowed money or the loss of interest by using personal funds.

2. Reduce the cost by compromising on the quality.

3. Utilize resources at the optimal level for the highest level of efficiency.

We will ignore the first two options, i.e., Capital and Compromising the Quality. Both these options will never last long and sometimes will lead to the closure of the company, sooner or later. We will ignore these two aspects since it is not the focus of this article.

The only third option, i.e., the company must focus on the optimization of Investment in Manpower and Plant & Machinery. We will discuss in detail how to reduce the cost of investments in Manpower and Plant and Machinery. We will discuss the involvement of Management at a macro level.

Investment in Manpower – Engaging the person means sharing the responsibility and, therefore, sharing the authority to make decisions. Thus, in Business, engaging any person to share the responsibility and authority to make a decision is a Risk. The higher the responsibility, the higher the risk. Therefore, it is The Most critical to select and engage the most capable person for Higher Responsibility. As such, it applies to all workforce engagement since at all levels the responsibility and decision-making authority is shared to some extent.