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Cost- & Profitability Management
Systematically or an Annual Occurrence? Why Short-term Cost Reductions Are Not Enough
Cost management is considered a cornerstone discipline within management and controlling. Despite all the smart discussions and methodologies, many companies repeatedly find it opportune to undertake drastic measures or cost-cutting projects, in which all departments are asked to contribute or even to achieve a blanket savings of x% of the costs. Everyone in the company knows that this approach doesn't make sense, and they also realize that it's political behavior that often dictates this course of action. The alternative fallback option is benchmarking, which is used to identify inefficiencies by comparing with others. However, this process too can quickly be called into question, as it attempts to compare the incomparable.
Cultural Anchoring and Strategic Steering as Levers
- Corporate Culture: A lived cost-consciousness and customer focus are fundamental.
- Strategic Levers: Product design, efficient purchasing, provider management, and automation are key elements for cost optimization.
The success of cost management lies in leveraging the right tools to effectively control costs. Without considering the cultural aspect, even the most fundamentally effective measures will fail. The design of products, effective purchasing, proper provider management, and correctly understood automation all have a significant impact. Standardization and complexity reduction have always been effective tools of efficient cost management - when they align with the business model and strategy.
Product Development: Platform Strategies and Complexity Reduction are Key to Profitability.
In most companies, the bulk of the profit margin is generated in the product sector. Major car manufacturers have demonstrated how complexity reduction through platform strategies can lead to significant savings, while on the other hand, a variety of models must also navigate the balance between market demands and regulatory compliance. The lever in profitability management on the product and service side lies in development, as much as development departments might not like to hear it! Platforms, shared components, configurable variants, and optimizing the product for manufacturability are just a few examples of highly effective levers for profitability.
Business Operations: Specific Tools in Areas like Purchasing and Accounting Contribute to Process Optimization and Cost Reduction
In day-to-day operations, every department needs its own specialized tools. For example, purchasing must achieve savings targets from target costing analysis along the bill of materials through supplier consolidation, framework agreements, and greater supplier involvement in the process. Similarly, accounting must manage special topics induced by unique sales agreements, complex arrangements in provider management, through transparent communication with these organizational units (the "complexity drivers") and through consistent process improvement into a standardized area. The levers for improvement are often obvious but require the collaboration of several departments to enhance the process. For example, the most significant lever for accounts payable is still the consistent use of the ordering system - a real win-win situation for all parties involved. These kinds of savings are rarely achieved through cost-cutting initiative.
A genuine cost-consciousness and an unwavering focus on the customer form the foundation for sustainable profitability and efficiency in an ever-changing business world.
Stephan Grunwald | Senior Partner CFO Advisory
Success Factors
The Role of Corporate Culture in Cost Management - Why Must the Issue Be Anchored in the Culture?
Effective cost management requires a cost consciousness deeply embedded in the company culture and a continuous focus on the customer. These cultural aspects are crucial for the successful implementation of cost management strategies and for creating an environment where cost awareness is lived and encouraged.
The more division of labor in an organization, the more removed the economic consequences of one's actions become. If there isn't a regular emphasis on the understanding that every euro spent must at some point be earned from product margins, indifference sets in. Then, penny items are shipped between plants by express delivery, faulty invoices are approved out of convenience, software is purchased and never implemented - and nobody gets upset. No one treats their own money this way - but when no one cares, these behaviors creep in.
Why 4C?
As an experienced management consultancy, we understand the complexity of cost and profitability management in today's business world. Our expertise lies in implementing culture and strategy-based cost management solutions aimed at long-term efficiency and profitability enhancement.
We offer you:
Profound Understanding
Our team possesses extensive knowledge in all aspects of cost management, from product development to ongoing business operations.
Customized Strategies
We develop tailor-made solutions that align with your corporate culture and strategic goals.
Sustainable Results
Our focus is on creating long-term value by integrating cost consciousness into the DNA of your company.
Collaboration
Trust in our expertise to enhance your cost and profitability management. Reach out to us today to learn how we can assist your business in achieving lasting success. Together, we can establish the groundwork for a future that's both efficient and profitable.
Client Testimonials
"The 4C GROUP pursues a consulting approach that is rarely found today. The combination of professional know-how, procedural expertise and technical competence offers considerable added value, especially in performance management. Concept and implementation go hand in hand and you get not only a presentation of options, but real consulting based on individual requirements".
Oliver Braun, Managing Director | Intralogistics Solutions
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