During a recession, fixed costs can threaten a firm's survival or severely limit its options. This paper aims to show how fixed costs can be transformed into variable costs through an innovative process known as “variabilization.”
The paper provides examples of applying the technique within an organization (back‐end variabilization) and creating value‐added solutions for customers (front‐end variabilization).
The researchers suggest that managers approach major suppliers and ask them to consider buying back the overhead assets they have sold the firm. Then imagine negotiating contracts that require a firm only to pay for those assets as they are used or, even better, as a percentage of sales.
In many cases, embracing variabilization means that companies will sell their current assets back to their suppliers. By doing so, variabilization enables a firm to move from being a supplier to being a business partner.
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