10Minutes on sustainable cost reduction

January 2009
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Sustainable cost reduction and cost management

At a glance

PwC's insights on intelligent and sustainable cost reduction. Companies must simultaneously tackle both cost reduction and the company's cost management and control in order to realize enduring change to spend.

Companies are justifiably anxious to reduce costs. But the problem with many cost-cutting measures is that they are put into practice without considering their sustainability. Often, cost savings achieved in the short term eventually leak away. The failed cost reduction initiatives wind up damaging corporate infrastructure and culture, leaving companies struggling well after the recession ends.

Faced with a protracted period of sluggish demand and tight credit, companies are now asking, “What has to fundamentally change so our cost reduction efforts work today as well as in the future?”

  • Traditional methods of cost reduction often fail over time
  • A strong foundation for cost reduction activities must be established before introducing game-changing transformational initiatives
  • There is no accountability, accuracy, or way to evaluate cost reduction efforts without clarity of operating cost drivers and linkages to financial plans
  • There are a number of steps companies can take immediately to move to sustainable cost reduction
  • If the spend culture isn’t addressed, cost reductions won’t be sustainable