With company executives under increasing pressure to improve shareholder returns, cost reduction initiatives are constantly on the corporate agenda. Indeed in a recent survey undertaken by PricewaterhouseCoopers, 56% of respondents indicated their single greatest challenge was to control costs. Short-term cost reductions are no longer acceptable. Radical change is often required yet too much cost cutting can be fatal, leaving companies under-resourced for the future.
Sustainable cost reduction is about re-defining the cost base of a company. The operating structure (service and cost) required to support the strategic direction of the company must first be defined and should incorporate best practice adopted by market leaders. In many cases, the operating structure will no longer be consistent with the strategic direction of the company and must be re-aligned, resulting in significant structural change. This may include radically revising supply chains, centralisation of activities for multi-entity, multi-location companies and / or the outsourcing of non-core activities to lower cost operators - variable cost models with instant scalability are preferred to fixed cost models.
At PricewaterhouseCoopers, we challenge the existing cost base of companies vis-à-vis their strategic goals. We also challenge the thinking behind existing processes drawing on the experiences of our team and those of best-in-class market leaders contained within our Global Best Practice database. We help to create cost transparency for clients by making the critical differentiation between 'good' and 'bad' costs.
- 'Good costs' are those that are necessary for the current and future growth of the company (e.g. research & development training etc).
- 'Bad costs' neither support the growth of the company nor are they part of the company's infrastructure (e.g. redundant processes, inefficient procurement etc).
In short, we can help to improve your business by balancing your need to contain costs and your desire to grow market share. We identify cost reduction opportunities, which we validate with our clients and then support them in implementing implementing the relevant programs to realise the associated savings.
