SUSTAINABLE COST REDUCTION
Research consistently shows that most organizations fail to sustain cost reductions for more than three years. Progressive ones use tools like activity-based costing to identify cost reduction opportunities. While this may support short term cost reduction, capability gaps often remain that allow costs to creep back into organizations.
We resolve this with integrated planning and performance management processes. They enable inventories, resources, and cost structures to quickly self-adjust to changing customer requirements, market conditions and profit targets. In other words, they continuously align cost structures with revenue streams. In so doing, they provide continuous and forward looking views of the following:
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- Business process and activity costs
- Value added and non-value added costs
- Product and customer segment profitability
- Productivity costs, expressed in terms of dollars per outcome
- Cost reduction inventory, whereby all opportunities are valued and connected to potential projects
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A key component of these forward looking views includes integrated scenario planning. It enables manufacturers to prevent new products and customers from introducing unforeseen costs into organizations. Collectively, these capabilities also enable manufacturers to establish effective ownership of the following:
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- Inventory levels
- Cost to serve and overhead costs
- Customer satisfaction and retention
- Product and customer segment profitability
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Integrated planning and performance management processes also support profitable growth and operational excellence, two closely related business objectives. Details about the solution that supports the above can be found here.
