Today the practice of implementing cost management has evolved — from adopting tactical and, at times, desultory measures to evade insolvency, to making it a part of core, strategic initiatives. While many executives cite the economic downturn as one of the primary drivers for adopting cost reduction measures, companies today are employing total cost management techniques in a more disruptive fashion for new product development, solution differentiation and better customer experience — all with the objective of enhancing competitive advantage.
In a recent survey conducted by EY, 27 per cent of Global CFOs cited cutting costs and driving efficiency as the single most important priority for businesses over the next three years. Maintaining cost competitiveness was also cited as one of the top 10 risks perceived by CFOs in another survey conducted by EY.
Cost cutting solutions are pre-requisites for sustainability of growth for a new business. First year of any business is crucial for future growth and success. If business falls in to huge debts at initial stages then it might become too difficult to attain a steady growth in comingyears. Key to success lies in gaining more business and keeping overheads as low as possible.Low overheads will also help the business to survive in the down period. Few of Cost CuttingSolutions are:
- Outsource non-core activities:
This will reduce fixed-cost, make your business flexible and you can react faster to an economic down turn. Take part in our #UCANOutsource program which has helped over 50 clients.
- Review your fixed cost:
Quite often we are spending for services or products which our business does not need at initial stage. Analyze fixed cost each month and try to minimize it. Take part in our #EaseOfDoingBusiness program which has helped over 50 clients.
- Divide your staff in Virtual Teams:
Let your staff work from their home. Use emails to allocate tasks to your staff and arrange meetings to review progress and discussing future plans.
- Back-end processes
Such initiatives typically include setting up of shared service centers (SSCs) for processes such as finance and accounts, human resources, IT support, and customer support. For instance, several companies are reengineering functions such as recruitment, facilities management and administration. For example, a leading BPO company achieved a 25 per cent reduction in its employee transport spend by optimizing working shifts, leveraging technology to optimize routes and redesigning the model for payouts to cab service providers.
- Innovation in operations
Leading organizations have innovated their operational processes to achieve significant bottom-line benefits. In this regard, the emergence of smart industrial devices and sophisticated data analytics are serving as critical levers that can enable organizations to make intelligent decisions that facilitate cost reductions. For instance, a global metals and mining conglomerate is using a network of smart, interconnected trains, trucks, drilling rigs and drones to get real-time updates regarding the status of ore-extraction. This has enabled the company to optimize its extraction process, resulting in enhanced productivity, reduced waste and energy savings of up to 40 per cent. Companies have also achieved sustainable savings by innovating their operational processes.
Successful cost management approaches focus on three key elements: a clear vision and definition of success, and triggered only after a carefully crafted business case that documents the value potential of the initiatives. Second, the pace of such initiatives is clearly established via effective sequencing, project management, and balancing tactical and strategic wins. Third, they embed sustainability by reducing the right costs and redeploying expenditures to areas that can drive market differentiation.
A balanced approach – by tackling both basic cost management as well as making strategic changes – is therefore, critical. This will ensure that a total cost management program generates value that is aligned with an organization’s business strategy, creating competitive advantage.
Seeking Advice? At PeriGrow we assist clients coming from different sectors in finding best possible solutions meeting their needs. We offer advisory and management consultancy services leading to development of Small and Medium size businesses. Feel free to contact us by writing to us at firstname.lastname@example.org or +91 22 6117 4910 and we will assist you in bringing success to your business.