Cost Optimization
Cost Optimization
Cost Optimization is known as taking out cost is easy. However, companies that seek to balance material, sustainable cost reductions with broader strategic goals have a far more complex challenge on their hands. Addressing short-term cost-out imperatives, while ensuring your company maintains the core capabilities it needs to support strategic goals and compete in the marketplace, is a delicate act.
Often the most obvious places to look for savings directly conflict with strategic considerations, and there may be limits to how much savings you can extract. In addition, it is often difficult to challenge your organization to consider potential opportunities because the fact base for key cost levers is not documented. Or your senior team may believe there is no room for improvement, while remaining oblivious to best practices in the industry or analogous sectors.
Furthermore, achieving the most effective and sustainable cost transformations, generally requires complex solutions, such as material organizational or process redesigns, not to mention capital investment and senior leadership time. As a result, the payback period, or simply the reluctance to change, becomes a stumbling block.
How we work with clients to optimize costs
MARKEF helps clients create optimal cost positions by first undertaking a comprehensive review of all possible levers, leveraging a broad toolset and deep functional experience. Taking a fresh look at your cost base doesn’t require a lengthy and overly detailed, desktop-based diagnostic, but rather a rapidly developed, fit-for-purpose fact base that can support well-coordinated initiatives.
Fact base development. We use our deep, sector-relevant functional experience to help clients create a single source of truth within a matter of weeks. This normally involves:
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Cost segmentation by function
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Decomposition of costs by segment
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Identification of cost reduction levers
Opportunity hunt. We use a broad productivity toolset to identify opportunities for each client situation. We then develop an overall savings target that can be cascaded down to various initiatives. This toolset includes:
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Spans and layers :
Ensures that the breadth of reporting lines to the front line is appropriate
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Value stream mapping/LEAN :
Minimizes duplication and ensures only value-generating activities are undertaken
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External benchmarking :
Creates a clear view of what “good” looks like
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Process redesign :
Eliminates redundancies and streamlines processes
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Cost/value driver trees :
Decomposes costs into their underlying drivers and addresses the drivers
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Contractor assessments :
Determines degree of reliance on contractors and the efficiency of doing so
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Operating model :
Redefines allocation of responsibilities and where work is done
Mobilizing the program
A change program guided by leaders within the company has a far greater chance of succeeding than one driven by external advisors. That’s why we view our role as supporting business-led initiatives. We are able to draw on our deep experience in Organizational Strategy and Value Activation to help our clients configure their businesses to unlock the value of their most complex cost opportunities.
We typically can deliver profit improvements of 10-30% for our clients
