The global economic collapse of 2008–2009 is widely recognized as the most severe crisis of its type since the Great Depression of the 1930s. As of this writing economists and analysts cannot be certain that the crisis has yet reached its profoundest depth; all agree that it will take years, if not decades, to restore the economy to anything near its prior strength and expanse.

No geography, industry, government or socioeconomic group has been spared. As the commercial economies and public sector budgets contract, there is increased pressure for organizations to survive the crisis by reductions in the cost of operation. The rescinded demand for goods and services has revealed that global overcapacity has been evident through rampant increases in unemployment, the total elimination of enterprises, the consolidation of many who remain, widespread shuttering of plants, and the closure of tens of thousands of retail outlets. Following demand and capacity balancing, many organizations have looked to restructuring, outsourcing and the tried-and-true analysis of profit-and-loss (P&L) statements to identify myriad cost reduction opportunities.

In a difficult economic period, people are tempted more than ever to apply quick fixes and ad hoc solutions. Cost reduction activities may be knee-jerk reactions—typically, poorly planned and executed—rather than well-devised strategies. Grasping for solutions is a natural, yet ineffective, reflex. Without careful analysis and understanding ...

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