In the first segment of Executing a Successful Cost Optimization Program, we focused on initiating the program, prioritizing objectives, and executing. In the second part of the series, we will share how to optimize with suppliers, monitor, and maintain the cost savings.

The Last 3 Components

A successful Cost Optimization program includes the following components. In the second segment of this two part series, the focus will be on initiating the program, prioritizing objectives, and executing.

4. Partner with Suppliers

All organizations should look for opportunities to partner with suppliers where feasible as part of the Cost Optimization program. Companies that manage their supply base with governance focused on maximizing mutually beneficial interactions are better positioned to maintain operations, while achieving positive Cost Optimization results. This includes appropriate risk and reward sharing, as well as exploring supplier redundancy. The supplier’s segment and performance are the key inputs into these considerations.

5. Invest in Technology and Automation

Automated systems streamline processes and eliminate repetitive tasks. They can perform high volumes of tasks with a high level of consistency and accuracy. One of the key benefits from investing in automated systems is lower operational costs from reducing the amount of manual work and error corrections, while also improving product and service quality. This can equate to a ~20% reduction of time spent on manual processes.

Implementing data-driven technology, such as analytics and artificial intelligence, provides real-time insights that enable faster and more informed decision-making. This can accelerate the ability to both identify cost savings opportunities and quantify the results of cost reductions implemented.

Investments in technology and automation also enable companies to scale their operations without proportionally increasing their workforce. As demand grows, automated systems can handle larger volumes of work without the need for hiring and training additional personnel.

Implementing new technology and automation requires up front investments that can be significant. A thorough business case will demonstrate whether the expected long-term, sustainable cost savings justify the investment.

6. Monitor Progress and Celebrate Successes

Companies must establish a robust monitoring framework to measure and report cost reduction results and maintain the momentum of the Cost Optimization program. The program team should conduct regularly scheduled reviews of the spend analytics dashboard. Evaluating changes in the dashboard data will determine whether specific cost reduction actions are providing the anticipated results. It is important to acknowledge that the timeframes for benefits realization will vary, per the underlying business cases. Therefore, actual results should be analyzed consistent with the expected timelines for the specific cost reduction actions taken.

When results fall short of expectations, conducting cross-functional root cause analysis can determine the underlying reasons. This will then help the team address the core issues rather than just addressing the symptoms. The lessons learned can then be applied to other cost reduction actions planned or already in flight.

As progress against cost reduction goals are met or exceeded, recognizing, and celebrating employees for their contributions can boost morale and motivation. It demonstrates that their contributions are valued and that they are making a meaningful impact on the company’s bottom line.

When employees’ efforts to reduce costs are acknowledged and rewarded, it can lead to a greater awareness of the importance of controlling expenses at all levels of the company and help foster a culture of cost-consciousness within the organization. And since cost reduction initiatives often require cross-functional collaboration, celebrating success reinforces the idea that working together can lead to positive outcomes.

Thought Logic’s consultants can help you understand how a Cost Optimization program could be implemented at your organization, including an initial assessment and roadmap. We have expertise in Digital Transformation, Finance, Organizational Solutions and Supply Chain, among other relevant areas. Our experts stay versed in industry-leading methods, leveraging years of consulting and industry experience with our unique culture of client partnership to deliver big results. If you would like to learn more about how we can help your organization, please contact Daniel Boyles or Caroline Freeman.