The process of cost optimization should start much earlier than when something starts to fail in the company. It is best to implement it when the situation is stable and the financial results are good. This will allow for thorough preparation of the process and implementation of changes in a thoughtful and safe way for business.
Cost optimization is nothing else than increasing the effectiveness of processes and eliminating activities that are costly and time-consuming, but are not necessary in an organization. The final effect is cost reduction in the long term, but with the assumed level of quality and strategic goals. Optimization is not only a process focused on reducing expenses, but also aims at their proper distribution.
Speaking of a long-term perspective, as part of the implementation of optimization activities we will find many places for the so-called quick wins, i.e. ideas and changes that are possible to implement in a short period of time. This may be, for example, reducing a given cost category, increasing the efficiency of a single process or implementing Robotic Process Automation (RPA) solutions enabling automation of selected activities.
A good time for change
The process of cost optimization should start at a time when the company achieves good results. Then the owner or management team, who thinks ahead, can fully devote themselves to this process and prepare for a more difficult period in the life of the organization. And such a period always comes sooner or later. More often, however, we are dealing with a situation where cost optimization activities start at the moment when things are bad in the company.
Symptoms of deterioration of the company's situation may be different. The more we know and measure in a company, the easier it is to identify them. Therefore, the controlling function cannot be overestimated. Thanks to it, at the right moment we will notice a drop in profit or revenue, an increase in costs or a drop in other measured indicators. It is important to pay attention to trends, not just numbers. Compare data with analogous historical periods and descend as deeply as possible in these observations, analyzing individual departments, functions and cost categories.
A careful analysis of all available data, values and indicators will show whether changes are necessary in the company. Employees are also an important source of knowledge about the condition of the organisation. Regular communication with the team will make it easier to diagnose threats that may be invisible to the management.
The cost optimization process consists of fixed elements, regardless of the area in which the company operates. However, this does not mean that it is completely independent of the industry. Cost optimization can be approached from the cost category or process side. An effective approach is a comprehensive process-based approach, but taking into account cost categories that are common denominators for processes (such as energy, gas, fuel, paper, telephones, internet, tax area, etc.). In this way, we will not omit any important element. We start our research by identifying all processes in the organization. This is followed by meetings and workshops with the management to jointly identify the objectives and areas that are important for them. Then we analyze the current situation in particular areas: procedures, real activities of the process, internal expectations. The next step is to prepare ideas aimed at cost optimization and performance improvement. Finally, the implementation of these ideas and their monitoring remains.
The most difficult stages of optimization
The key point in the whole process is the implementation of ideas. Even the best concept without its effective implementation in the right areas will not bring the desired effect.
Important elements of the optimization implementation stage are the schedule of activities, communication and process monitoring criteria. Depending on the concept, the introduction of changes may include, for example, the purchase of technological solutions, selection of new suppliers, transition to an outsourcing model or modification of the employment structure. All activities should be assigned indicators that will allow to measure the effects of the introduced changes.
Implementation of solutions optimizing processes is a stage in which employees play a very important role. Companies often face the prejudices and habits of the team, which is why proper communication with the participants of the process is so important. Precise explanation of what changes are to be made, what is their purpose and how they will affect the work of particular departments or individual employees is crucial for the success of the project.
The implementation of all stages of the plan is an important condition for the success of optimizing the organization's operations. Taking shortcuts will give a false sense of quick results, but in the long run it may cause problems. Dialogue with the team should be remembered not only at the pre-implementation stage, but throughout the whole process. It is important that the persons affected by the implemented changes are informed on an ongoing basis about the status of activities, their effects and subsequent stages. Without the support of all participants in the process - from the Management Board to the employees performing particular activities in the process - the project will be doomed to failure. It is important to talk frankly, share information and emphasize the importance of each of its members in the process.
It is worth remembering that optimization should be a permanent activity. Systematic measurement of the effectiveness of processes will allow to identify areas requiring changes on an ongoing basis and introduce corrective actions. Thus, it will facilitate the development of the company and strengthen its position in the increasingly demanding market.
Contact our expert