cost optimization

cost optimization

The area of ​​costs in times of a pandemic is very often one of the most carefully examined areas of enterprise activity. However, for many enterprises it is not obvious to clearly assess the effectiveness of individual areas of the company’s operations. Even a seemingly well-organized process may turn out to be a source of savings for the company, which are difficult for people from inside the organization to notice. The answer to challenges related to company costs may be a cost optimization process conducted with an external supplier. Navigator Business Consulting implements its cost optimization projects in two independent streams, focusing simultaneously on personnel costs and non-personnel costs . Depending on the complexity of the organization, the process of developing savings initiatives ready for implementation takes from several weeks to several months.

1. Analysis of organizational effectiveness

The first step to cost optimization is to understand the current situation of the company and analyze the effectiveness of individual activities carried out by the company. The stage of analyzing the current state (so-called “AS-IS”) is a time that allows you to look at the way of operation, the tasks performed by individual departments and even individual people. In the context of personnel costs, for each organizational unit a list of positions, current employment and tasks to be performed should be identified. However, for non-personal costs, you should first identify the main purchasing categories and analyze individual purchasing processes, supplier databases along with the applicable terms of cooperation. Any analysis of expenses incurred by an enterprise should not be made in isolation from market conditions or the specific conditions of a given industry.

2. Defining optimization solutions

Based on surveys conducted on the time consumption of tasks performed in individual organizational units and analyzes of individual expenditure data, savings hypotheses are defined. Savings hypotheses should not only focus on reducing unit cost. Attention should also be paid to optimizing trade conditions and limiting internal demand. At this stage, conversations also take place with external suppliers to verify the formulated hypotheses. In the case of personnel costs, inefficiencies in the form of, for example, unnecessary or duplicate activities should be defined. Along with inefficiencies, potential improvements such as automation, standardization, and outsourcing are also identified. At the end of this stage, the client receives a list of savings hypotheses along with the estimated savings potential.

3. Agreeing on the Savings Program

In the third stage, the proposed savings initiatives are subject to final verification. The impact of individual activities on the generated savings should be determined, and responsibility for the implementation of individual initiatives should be assigned – this responsibility may lie with the company’s managers or an external advisor. Together with managers, the goals and expected financial effects resulting from individual activities, implementation schedules and milestones should be agreed. At the end of this stage, the method of reporting the achieved savings and work progress should be determined.

4. Implementation of the Savings Program

The final stage is the implementation of the prepared Savings Program. Implementing many changes is not possible overnight, it usually takes at least several months. During this period, meetings are organized with current and potential suppliers, terms of cooperation are negotiated, the provisions of concluded contracts are verified and their possible impact on the company’s actual savings is analyzed.

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