In the early stages of the last major economic downturn, Costco Wholesale Corp. did for its shelves what it preaches to its customers: It bought in bulk and saved.
As The Wall Street Journal reports, the company, sensing a worsening economic slump, slimmed its product variety and bought more from fewer suppliers, said Richard Galanti, Costco’s CFO.
This retailer boosted buying power with its suppliers by taking advantage of the pricing benefits that come with buying more by the truckload.
More companies need to think like that as the fears of another downturn resurface, according to research released Thursday by Bain & Co. In particular, companies should be assessing financial strengths and weaknesses to streamline operations and reduce costs through technology, according to the consulting firm.
CFOs also must outline strategies for a variety of sour economic scenarios that include opportunistic investments, mergers and acquisitions, according to Bain, which examined financial results for nearly 3,900 companies worldwide across a variety of industries to determine which characteristics allowed some companies to thrive during rough economic headwinds.
Strategies like cutting costs early, before bad news hits, introducing automation where possible, and introspective downside scenario planning, helped about 10% of companies increase earnings before interest and taxes at a compound annual growth rate of 17% on average during the 2007-09 recession, compared with zero growth for those that weren’t as proactive, Bain said. Read the full story.
