In times of economic downturn, companies need to act quickly and smartly to help weather the storm. It is important to reduce costs in the short term without hindering growth drivers.
While cost cutting alone won’t protect profits and close cash gaps, consistent measures of controlling costs must be established in order to create a cost-optimal structure in the business and secure its long term value.
Below we outline four key areas of cost reduction for organisations:
Reduce or eliminate fixed and variable costs
In times of economic downturn, fixed costs in particular must be reduced in order to ensure sufficient profitability. Variable costs should also be reviewed in detail in order to be able to define an adjusted and cost base; this is essential to ensure the correct balance between operational capacity and demand.
A budget freeze for investments and development projects must also be considered in order to ensure a portfolio which is consistently geared towards a return on investment.
Outsource, insource or reorganise
There are numerous labour intensive tasks that can be carried out by external providers. This means that outsourced support functions can be easily be scaled up or down according to level of activity; brining both cost and time efficiency benefits to the business.
Implement cost reduction in a sustainable way
Internal operations and support functions need to be adjusted by reorganising the relevant areas or departments in line with the changed capacities and process optimisation. It needs to be determined which processes are necessary against the background of the service portfolio, then analysed and adapted. Process benchmarks and KPIs help to indicate potential inefficiencies in order to initiate the corresponding measures; organisational scenarios are consistently developed, roles and responsibilities are reviewed, line spans are optimised and overall a process-oriented organisational structure is restored.
After evaluating and selecting a scenario, the organisational units are assigned specific individual services, roles, capacities and specific employees in order to establish an organisational structure that best supports the cost-optimal and growth-promoting service portfolio.
For more information on strategic cost reduction, contact us and a member of the team will be in touch to discuss further.