Factory overheads surge. Cutting costs is the key to competitive advantage.

Companies that successfully reduce business overheads will gain a significant competitive advantage in 2010 as inflation hits both these costs and raw material prices . The Office for National Statistics (ONS) latest figures show overheads have risen at their fastest pace for 12 months.

Input prices rose by 0.4 per cent in November, and are 4 per cent higher year on year. The price of goods leaving factories also jumped 2.9 per cent annually.

While Economists had expected this latter increase, the rise in manufacturing prices suggests that consumer price inflation will raise its head in coming months. However most commentators think that demand will remain low and that this means producers (and retailers) will have to absorb the increases to sustain sales.

Certainly we in Expense Reduction Analysts are seeing widespread recognition amongst clients that reducing overhead costs and then sustaining the impact of the savings gained is an absolute priority. Given that we achieve savings of an average of 19.7% for our clients, just how valuable is an almost 24% overhead cost advantage when consumer demand is low?