On a quest to cut operating costs

Businesses review spending habits to help ride out economy

Dario Paramo assembles hangers at Henry Hanger Company, where managers are trying to cut costs. (Cheryl Senter for The Boston Globe)

NASHUA - When the Henry Hanger Company of America Inc. huddled with a consultant recently, cost cutting wasn't just high on the agenda. It was the agenda.

So they were heartened to hear their consultant, Rudy Bazelmans, had been rooting through the trash bin behind the company's headquarters, a red-brick mill circa 1889.

"I actually went to the Dumpster, climbed up on top, and said, 'You know, there's a lot of corrugated material in there,' " Bazelmans told them. The Dumpster dive resulted in a recommendation to change trash vendors and separate recyclables into another container.

For company president Henry Spitz, cutting costs is the only way to ride out the economic downturn. "There's not a lot of opportunity to sell product right now," Spitz said candidly. "I find myself spending more time thinking about how to save money. We're looking at everything, soup to nuts."

The company, founded by Spitz's grandfather in 1929, the year of the stock market crash that led to the Great Depression, has endured eight decades of boom-and-bust cycles. Now, Spitz has hired Bazelmans to redouble attention to the details of every cost in hopes of navigating a choppy business environment unlike any since the company's founding. The new approach to waste management alone is projected to save more than $500 a month, Bazelmans reported with pride.

"Maybe we could cost save on snowplowing next winter," Spitz suggested.

The family-owned company, which sells custom hangers to clothing designers like Giorgio Armani and celebrities like Arnold Schwarzenegger, isn't the only one pinching pennies these days.

With sales slumping everywhere in a recession now entering its second year, companies are moving aggressively to slash their expenses to shore up dwindling profits. Consultants like Bazelmans, regional director at Expense Reduction Analysts in nearby Manchester, are doing a brisk business advising clients not only on market strategy, but increasingly on tactical issues such as how to scrimp on office suppliers, copiers, or even snowplowing.

R.H. White Construction Co., a privately held company in Auburn, Mass., outside Worcester, has recently switched carriers or renegotiated rates for its cellphones, office telephones, and data transmission lines. Through bulk buying, it also has lowered its cost for chemicals such as chlorine and phosphates, used for treating water to be delivered to Chelsea, Hyannis, Milford, and Southbridge.

"We've been trying to find the low-hanging fruit," said Kenneth M. Margossian, the company's chief operating officer. "We probably have another 10 to 12 areas we're going to be looking at. Every component of our cost structure is being looked at now, and our competitors are doing the same. It's become a matter of survival."

Jon Karis, chairman of the venture and emerging growth companies practice at the law firm Nixon Peabody LLP in Boston, said out-of-state clients are discouraging him and other lawyers from flying to meetings, opting instead for phone calls or videoconferencing. Such incremental savings, taken together, can add up to a lot of money.

At small companies backed by venture capital, Karis said, many chief executives are reporting to their boards monthly, or even weekly, on their cost-saving efforts. "Boards of directors are instructing management from the very top down that you have to cut costs, you have to do it immediately, and everything is fair game - head count, salaries, healthcare costs, travel, and entertainment," Karis said. "Every conceivable cost center is being looked at carefully."

Henry Hanger has cut its workforce from 49 employees to 30 at its home office in Nashua and another 14 at satellite offices in New York and Los Angeles. It also retained Expense Reduction Analysts, which gets paid a percentage of the savings it can provide, to examine other costs, from health and property insurance to workers' compensation.

Sitting at a table in a kitchen area behind the company's office receptionists, with racks of wood and padded garment hangers adorning the wall, Bazelmans gave a progress report - complete with charts and spreadsheets - to Spitz and Teri Labrie, who recently joined the company as controller. In the background, a radio blared oldies from Carly Simon and Sly & the Family Stone.

Some of the consultant's recommendations have already been in effect long enough to assess and quantify the savings. "If you go to page four, we looked at every trash pickup since June '08," said Bazelmans, flipping through a bound "baseline" report. "Your waste stream now is more homogenous. It doesn't have cardboard in it. This is a small contract, but we're able to save you 62 percent."

"Pretty straightforward," Labrie said, poring over the columns of data in Bazelmans' report. "I can wrap my brain around that."

Next they moved onto parcel shipments. Bazelmans said Henry Hanger can expect to save 15.6 percent by changing the way it allocates its freight. Where the company had been splitting shipments between two suppliers, it has consolidated most of its business with a single supplier, except for ground shipments to California. The consultant also identified ways in which Henry Hanger can further reduce costs by packing boxes with hangers more efficiently.

Bazelmans is an evangelist on the subject of cost cutting. "If you can save $10,000, it's worth $60,000 in top-line sales," he insisted.

Labrie, the company controller, said she was eager to drill down into package freight data such as billable weight and fuel surcharges. "So the audit will include detailed information?" she asked.

"Line by line," Bazelmans assured her.

"Good," said Labrie. "I'm the detail gal."

"You get to see the spreadsheet," he promised.

Spitz, for his part, was thinking ahead. Henry Hanger buys paint, thinners, and lacquers to apply to the plain sanded wood hangers it imports from China, and he wants to pay less for of these materials.

"It would help to have some fresh eyes looking at this situation," he told Bazelmans.

Robert Weisman can be reached at weisman@globe.com.