A good cost optimization strategy aims to redirect resources to profitable activities. For example, strengthening the sales force is a unit that generates direct revenue.
To optimize, you need to analyze the company's activities and find out which areas give the greatest return. Next, you need to establish all aspects of the company: from formal actions to a way of thinking. The next step is to channel your funds towards unique differentiators.
To intelligently optimize and reduce costs, work through 4 elements.
1. Benchmarking. Compare yourself to industry leaders. Analyze your costs and others, at least for the main parameters:
EBIT
Engineering, procurement, sales, administrative costs.
Operating costs.
This will help you find the potential for cost savings.
Optimization should not conflict with your competitive strategy. Don't cut back on spending that gives you added value and keeps you competitive. If you sacrifice quality or some feature, you will lose the argument in the question "Why should a customer buy from us?"
2. Information field. When the owner of the company, together with the top executives, have decided which areas of the company will receive more funding and which will receive less, it is important to convey this information to each employee. A couple of top-down statements are not enough. We need everyone to know the new strategic goals and to act in accordance with the new logic of work. Make sure that employees take orders seriously, and do not treat them as “just another fancy” of the manager.
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