Achieving Cost Reduction
Context
Given that competition, commoditization and price pressures are here to stay, firms can no longer focus on building markets and ignore the imperative to drive out costs. Cost reduction initiatives are in fact integral to growth initiatives, enabling organizations to compete and maintain operating profits.
Most companies do not place enough value on the resources it takes to make cost optimization a priority. The few that do, maintain a measurable advantage over their competition. Growing companies tend to focus mostly on costs that are directly related to the product or service that they provide. That focus lends itself to indirect costs that build over time and decrease in efficiency.
At Market Strategy Group, we have found that even our fastest growing and most profitable clients find large opportunities for immediate bottom-line savings when the right focus is placed on indirect spending. Sourcing suppliers and negotiating agreements become strategic processes and best-in-class procurement organizations are quickly built once such opportunities are identified.
MSG point of view
Cost optimization cannot be done with blinders on. Teams must be focused on creating immediate hard-dollar savings, but also recognize diverse purchasing needs including maintenance of key supplier relationships, quality standards, and business continuity. Sustainable savings are best created with an executive mandate for change and a holistic approach to optimizing costs. An organization aligned around cost optimization, with the right analytical sourcing skill-sets, and passionate purchasers that understand how purchasing standards tie to company strategy, can be a cost optimizing organization.
Sometimes cost optimization requires difficult organizational or cultural change. Meeting the challenges of driving out costs requires a team of strategic thinkers who understand the market impact of every dollar spent, working closely with internal experts who champion savings throughout the organization as they execute purchases.
What we do
Market Strategy Group brings a level of analytical rigor and strategic perspective that purchasing organizations, and often executive teams, cannot apply on their own. We help both executive teams and the people making purchasing decisions pull their heads above the clouds to identify real opportunities for sustainable, year-over-year savings. These savings come from a variety of cost optimizing levers including:
- Price negotiations
- Vendor rationalization
- Purchasing process improvements
- Cross-geography spend consolidation
- Cross-business unit spend consolidation
- Organization alignment
With a deep understanding of how these levers impact your organization, we also identify the human resources that are either accretive or costly to the total cost of running the purchasing organization. We tie organizational recommendations to sourcing strategy so no savings initiative will be temporary. The result is an organization poised to leverage its best people to create additional savings long after we are gone. This way, as your company continues its smart growth trajectory, cost optimization remains a part of the lifeblood of that growth.