Cost efficiency
How operational excellence can contribute
The importance of cost efficiency
In a context in which a large part of the companies had not yet recovered from the effects of the Covid-19 crisis, more clashes have appeared threatening their economic sustainability and cash flow. On one hand, there is the conflict between Russia and Ukraine, which has brought its consequences, on the other hand, the increase in the price of raw materials and electricity, which we have already dragged on since 2021 and which has been getting worse, and finally the inflation increase caused by this rise in raw materials. According to the new edition of the Intrum European Payments Report, inflation is limiting the growth of 55% of Spanish companies.
This same report also highlights that 5 out of 10 companies recognize that they do not have the necessary capacity to manage the impact of such a significant rise in prices on their business. 6 out of 10 Spanish companies admit that, due to inflation, it is increasingly difficult for them to pay their suppliers, and 58% of entities are being more cautious with their spending and borrowing plans due to the rise in interest rates.
One of the reasons why these difficulties exist in European companies is due, according to the Intrum study, to the fact that 51% of surveyed people do not have the experience or the ability to adapt and/or anticipate necessary to correctly manage problems. Taking the step to seek professional advice can make the difference between achieving operational excellence or not achieving it.
Operational excellence
Operations excellence is the key to competitive advantage in many markets. Having a good service level, quality and adjusted costs depends on the efficiency and effectiveness of operations. At DOT Consulting, our main objective is to support our clients to achieve operational excellence throughout the entire value chain: from the moment of designing the product or service to production, logistics, maintenance, sales and customer service, administration and corporate services. Enabling customers to improve agility and efficiency at each stage of the value chain is very important to us in order to remain competitive, while reducing or restructuring their costs.
Cost restructuring
We started this article talking about the complexity of the context in which we live, where due to diverse factors the price of raw materials and energy have risen. This has had a great impact on organizations, who have been forced to increase the prices of their products and feel that the situation is like a fish biting its tail: if prices increase for consumers, they will be less willing to consume and that will lead companies to not be able to cover the expenses generated by their product, which are already higher.
At DOT Consulting we help identify the real costs of our clients' products and services and determine potential savings in order to design and implement an action plan that allows a sustainable reduction in their cost structure; from the digitization of tasks through innovative 4.0 solutions, to eliminating activities that do not add value or that duplicate tasks or creating LEAN processes by eliminating stages of the process that do not add value to the customer or the product, among other actions.
How are costs restructured?
For us, the most important thing to reduce the level of operating costs in a sustainable manner is to carry out an adequate cross-sectional analysis to determine the weight and impact of each of the items that make up the production processes. Once the cost structure of the product or service is known, an action plan must be defined that allows the necessary cost adjustments. The cost restructuring plan must be projected in the short, medium or long-term depending on the potential impacts and the feasibility of the actions. At the same time, it is essential to establish control mechanisms that provide visibility of non-compliances. In this way it will be easier to control deviations from the standards.
Dedicating time to it, in the long term, will guarantee the company to have control of its expenses, and will reduce risks, since it will be fully aware of the expenses and costs involved in managing the company, it will reduce expenses because it will be known where resources are wasted and profitability will increase. The effects will be seen in the final profitability and if all this is added to investing in technology to innovate and meet the demands of a world increasingly competitive, you will be investing in the growth and optimization of the company.