Maybe this will wake up the FED. Why do big companies always go after headcount?
Today’s post is by Ron Southard, CEO at SafeSourcing Inc.
Maybe this will wake up the FED. Why do big companies always go after headcount?
Our government just provided direct funding to Intel of $8.5B and another $11B in loans through the chip act.
And now In a LinkedIn article by James Callan indicated that Intel revealed plans to cut 15% of its workforce, or about 15,000 positions, as part of a $10 billion cost-saving push. While the size of the cuts won’t satisfy the entire $10B, it is certainly a big part of it. I have always said that the typical approach of management is to look at headcount first when other alternatives can serve the same purpose in a reasonable period. In my opinion, the 1st place to look is at all other spending, those being direct, indirect, and capital programs before you just get rid of people and pay out huge severance programs. I am not saying they have not been looked at.
Let’s face it, Intel is a behemoth with over $52B in annual revenue which is down, and their most recent quarter reported a continuing trend versus the same period last year. While there are lots of reasons for the loss of revenue and declining margins, I still believe there are better ways to accomplish cost reduction. Turn to your finance and procurement teams, and do not accept the “We Can’t” message that you are sure to hear. We can’t because we have contracts in place, we can’t because it will cause supply chain issues. While the company is huge, and may think there are not sufficient supply sources, that just isn’t true, but you have to be willing to explore alternatives and hold your current supply chain accountable. After all they helped you get where you are.
I recently had a GE employee that sources raw materials approach me about a metal product they use in building engines. Their current supplier was giving them grief about price and lead times that were just unacceptable. He said he was not aware of additional suppliers. The next morning, I sent him a list of ten from around the globe. They have now found one that is going to provide the product for them and add it to their portfolio of companies to source the product from in the future. This would have been a “We Can’t scenario.”
Intel’s revenue for 2023 was $54.2 Billion. Cost of Goods was $32.5B and the resulting Gross Margin as a percentage was 40%. There is certainly more that can be squeezed out of that $32.5B. Example: Let’s assume you are just able to address 50% of it and reduce costs by only 15%, that represents $2.4B or a quarter of the desired savings. This is also without even addressing the expense portion of the P&L that is generally target rich.
Who knows maybe there could be 3,750 jobs retained and retrained.
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