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Eliminating Costs is Always Better Than Reducing Costs

It seems we give too much attention to reducing costs and not nearly enough to eliminating costs.

It seems we give too much attention to reducing costs and not nearly enough to eliminating costs. If all you ever do is reduce costs, you will have to make adjustments every time prices increase. However, if you eliminate a cost, you will never have to deal with it again. Kicking the hay habit is a good example. If hay is no longer a part of your operation, it's a cost you no longer have to manage. If you just reduce hay feeding from 120 days to 45 days, then it's still a cost that must be managed.

A lot of producers have trimmed their hay feeding way back from what it used to be, but did they sell their equipment? Often not. They still have it and rather than making 500 tons of hay a year, they only make 150 tons. A lot less operating cost, but no reduction in the overhead cost of owning equipment. If the equipment were sold, the overhead cost would be eliminated.

Another downside of keeping the hay equipment is you can easily be tempted to start making hay at the drop of a hat. Got a little extra grass this year? Bale it up. Made some extra hay last year? Let's feed a little longer. Pretty soon you're right back in the same rut - enslaved by the hay paradigm.

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