Cost Cutting Analysis and Roll-out
In a very competitive market, our client was able to realize exponential growth through high-quality tailored service offerings and custom products to address diversified customer demand in the lower B2B market segment.
The degrees of freedom in the sales process however also caused data incompleteness and inaccuracies, leading to errors in the subsequent customer journey. Collaborating with a myriad of external partners to fuel accelerated growth heightened complexity and diminished control over processes, driving up service cost.
In response to this situation, our client initiated a Cost Efficiency Enhancement Project. This strategic initiative aimed to identify and implement cost-cutting measures across various departments and increasing the quality of service delivery. Followed by an operational excellence program designed to enhance operational efficiency, streamline processes, and ultimately improve business results.
Objective
We identify cost reduction opportunities by
- conducting an analysis and benchmark on direct & indirect costs, Cost to Acquire (CtA), Cost to Serve (CtS), IT cost and overhead cost,
- challenging current people organization of each department,
- and conduct an analysis on existing business processes, used tooling and external partners.
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The second objective was to implement efficiency measures: Introduce streamlined processes and organizational changes to improve operational efficiency and reduce unnecessary costs.
The last but continuous objective was the employee engagement: Ensure transparent communication and involve employees in the cost-cutting process to foster a culture of efficiency and standardized processes.
Methodology
Analysis per department
We organized workshops with each department to discuss their current team structure and processes. Conducting a detailed analysis on operating costs, resource utilization, and processes provided insights into:
- Direct and indirect costs, CtA, CtS
- Vendor contracts and negotiations – for tooling and outsourced work
- IT & overhead costs
- Process inefficiencies
We formulated a tailored plan for each department by benchmarking the prevailing cost structure, processes, and organization. This plan outlined cost reduction targets, contracts marked for renegotiation, and processes requiring immediate attention.
The outcome was a detailed short-term plan for reducing Full-Time Equivalents (FTE) and Operating Expenses (OPEX) in the next year, along with an optimized long-term plan spanning the next five years.
Methodology
Operational Excellence Program
In order to achieve both short-term and long-term objectives, it was imperative to implement process changes throughout the entire value chain. We systematically organized workshops for each focus area, employing methodologies such as LEAN/SIPOC to gain insights into existing processes, and DMAIC & SMART to address specific problems. We meticulously executed the identification, analysis, and implementation of quick wins and changes.
We paid particular attention on process standardization, focusing on the revision of sales and contracting rules to minimize exceptions.
We conducted workshops with cross-functional teams to actively engage employees in the process of cost-cutting and optimization. This approach aimed to encourage suggestions for improvement coming from employees and foster a comprehensive understanding of the forthcoming actions.
Results
The Cost Efficiency Enhancement Project yielded significant financial gains, achieving a substantial reduction in OPEX and FTE within one year. The project also led to a notable decrease in the number of external partners, resulting in enhanced process and cost control.
At the employee engagement level, we generated a culture shift towards efficiency and standardized processes. Sustaining this change required ongoing efforts to boost employee morale through transparent communication.
“Having formulated a detailed plan, we gladly assume accountability for executing it, actively overseeing the project management and analysis aspects in a substantive manner.”
irex Consulting played a crucial role as a strategic partner in identifying cost reduction opportunities and formulating both short- and long-term plans for our client. During the execution phase, irex Consulting took charge of project management for the Cost Efficiency Enhancement Project and served as a business and functional analysis partner, leveraging our industry expertise.