Strategic Cost Transformation
A big part of transforming your business model involves managing costs to enable profitable growth. Deloitte’s Strategic Cost Reduction practice focuses on structural, enterprise-wide changes that can produce sustainable cost savings and margin improvements. Based on our extensive experience with cost improvement programs across industries, we offer three broad cost reduction strategies that help organizations address cost categories tailored to their specific cost challenges: 1.Get the house in order – Focus on immediate actions to reduce costs, bring stability, and capture savings to avoid deterioration of the business. 2.Sustain the business – Take actions that help improve cost and competitive position, avert cuts that might inhibit future growth, and rebalance costs to fund investments in business strategy enablers. 3.Set the stage for growth – Develop a scalable cost platform for growth and invest in building capabilities to enable the business strategy while managing costs accordingly.
Companies across industries and sizes and in different phases - strongh growth, stable performance and in distress - all require proactive cost management. Often however they lack the experience, capability or capacity to materially improve cost and cash flow. Whether there is a need for tactical, short term cost reductions, eg. from staff reduction, benefit plan restructuring, tax refunds, real estate portfolio financing and inventory reduction or longer term, structural strategies such as organization restructuring, supply chain improvements, tax structure abritrage mplementation of shared services and process/technology integrations our Deloitte cost reduction experts can help you to identify what the best approach will be for your company based on your specific circumstances, ambitions and sector. In particular when it comes to understanding how emerging digital business models impact cost structures and how digital transformation can help reduce cost we are there to help.
At Deloitte we believe that cost reduction is not a quick fix solution to a short term problem. Firms must take a broader view of the organization to put aside internal barriers and restrictions to ensure reductions made drive performance improvement and generate shareholder value now and in the long run.
We have extensive experience in cost reduction programs, both national and international, and a strong track record in various industries for large multinationals to mid-size organizations. An examples of an impact case studies that materialized in significant annual cost savings: a Maritime Services Industry leader was faced with unpredictable market conditions and decreasing margins. A full cost review (including fleet and equipment rationalization assessment, workforce optimization of support pools and full blown overhead costs assessment) was conducted and results implemented.
Our comprehensive and time-tested approach will help you define a cost structure that fits your business strategy and goals. Our approach is designed around six guiding principles and uses advanced software tools and methodologies to realize quick and sustainable results:
- Art of the possible - We recommend to start here. We baseline your cost performance, compare to peers within and across industries, determine medium term product and service demand and identify opportunities. Practical, clear business cases are built and an integrated picture created to help decide what will be implemented.
- Inflight Assessment – You may already be underway with a cost reduction program. We perform a health check looking at approach, coverage, gaps, implementation plans, resourcing, capability and likely outcomes. Our research shows that clients often struggle to realize benefits from their cost reduction programs. We can continue to advice or step in to mitigate issues and improve speed and overall benefits.
- Rapid Cost Reduction - Where a company needs to generate benefits quickly (within 3 to 6 months) without major investment or restructuring we offer targeted opportunities around procurement (renegotiation and spend consolidation), manufacturing (lean assessment and planning) logistics (lane/mode optimization and overflow elimination) and commercial (pricing models, incentives, promotion efficiency and unprofitable customer/sku rationalization)
- Functional Cost Reduction - We are positioned to support you at a functional or business unit level. We support sales, marketing, procurement, finance, HR, manufacturing, logistics and the wider organization for financial, physical and digital products.
- Funding Growth and Investment - Companies are keen to fund growth and strategic investments from savings elsewhere in their business. Allowing benefits to be reinvested can really incentivize to find and implement savings. Innovation, product development, functional and wide ranging improvements allow clients to achieve reinvestment hurdles and better balance their working capital and investments.
- End to End Delivery - Following an ‘art of the possible’ assessment we offer end to end delivery support across the program and across the enterprise. Our experts can stay with you throughout the implementation can take responsibility for delivery if necessary.
- Digital cost transformation - Digital platforms, business models are often key part to delivering substantial and sustainable cost reductions. We will leverage our digital experts to help define and deliver your cost reduction targets.