Strategic Cost Reduction

Overview

A Comprehensive Financial and Operational Approach to Cost  Reduction

Now or in the future your organization may be faced with these situations.  Are you ready?

• Sales growth slows or declines
• Expenses grow faster than sales
• Increased need for services on a stalled or declining budget

The benefits are obvious.  Every dollar you save is a dollar that drops to the bottom line.  Capture those profits now!  In addition, organizations that have the most cost effective operations are those that survive difficult times.  Gain a competitive advantage by being the most efficient organization among your competitors.  Finally, one idea from this seminar can pay for the cost of admission.

Many of today’s managers have not lived through tough times.  Instead of learning through “trial by fire”, take advantage of the experiences of executives that have successfully reduced costs.  Through case studies of a variety of organizations that used a range of approaches, find those techniques that most closely apply to your situation.

Several special features are presented in this seminar.  First, you will benchmark how you manage work against the Malcolm Baldrige Award winners.  Insights gained will point to the cost reduction techniques that will have the greatest impact and probability of success in your organization.

Second, you will be able to cost out processes, product lines, and customers using activity based costing.  Distortions from traditional accounting may be causing overcosting or undercosting leading to faulty strategic decisions.

Third, you will get into the specifics of work to uncover waste, bureaucracy, bottlenecks, and inefficiency.  Practice powerful techniques to streamline and redesign key processes. Use design principles to create processes that are fast, low cost, and produce high quality.

Finally, you will take your most difficult cost reduction issue and apply the corresponding problem solving approach (there are eight distinct problem classes) that will generate a “breakthrough” solution.

Participants are encouraged to bring their most recent financial statements and the last five years of income statement in common form format, plus a calculator. You will analyze expenses and benchmark your performance.  Use your statements to uncover performance gaps and areas of waste.

Bring a team from your organization to fully capitalize on the tools and techniques and leave with action plans to implement immediately when you get back to your organization.

Through examples from many industries, you will learn a five-pronged attack on high costs:  

• Comparative Costing: Benchmark your organization against competitors and world class organizations to uncover and understand “cost gaps.” Once gaps are identified, use the appropriate tool (there are many) to close the gaps.

• Strategic Costing: Understand your costs across the value chain and for each strategic variable in your business. Avoid faulty strategic decisions from over- and under-allocating items in the income statement (costs and expenses) and the balance sheet (receivables, inventories, and fixed assets). Employ target costing and life cycle costing.   

• Hidden Costing: Learn to use Lean cost reduction techniques to discover hidden waste, rework, bottlenecks, and inefficiencies. Streamline and redesign key processes, and use design principles to create processes that are low cost, fast, and produce high quality.

• True Costing: Discover your “true” net profit by customer, product, and market. Learn how to trace true costs, employ Activity Based Costing (ABC) with cost drivers to accurately allocate costs. 

• External Costing: Apply the above techniques to supply chain management, employ a four-level model for making strategic outsourcing decisions, and find out how you can decrease your customers’ costs to endear them to you.   

Seminar Benefits

You will learn how to:

• Identify which cost reduction method is right for your organization based on how you manage work
• Choose cost reduction techniques based on how much you need to reduce and how soon it needs to be done
• Position your organization to use cost reduction as a strategic advantage
• Use key ideas from successful cost reduction case studies
• Discover your “true” profitability by customer, product, and market
• Benchmark your organization against competitors to uncover “gaps”
• Create “Close the Gap” programs
• Use “Best Practices” to move your organization to world class level
• Uncover waste, duplication and bureaucracy
• Guard against the most common reasons organizations get into trouble
• Increase customer satisfaction while simultaneously reducing costs
• Implement new ways to streamline the organization
• Learn to cut costs without causing organizational damage
• Gain the support and input you need from employees
• Get your organization into a continuous cost reduction “mind-set”
• Apply over 70 specific cost reduction tips immediately when you get back to your office

Seminar Outline

How work is managed based on a study of the Malcolm Baldrige Award winners

• Comparing how you manage work and typical cost reduction approaches
• Case studies of successful cost reduction efforts

History of Cost Reduction

• Success rate of past cost reduction efforts
• Reasons cost reduction often fails
• Why across-the-board cuts don’t work
• Most common reasons organizations get into trouble

Cost reduction vs. getting more sales

Internal benchmarking, looking at your financials

• Common form analysis
• Ratio analysis

Reducing costs from suppliers

• Key measurements for suppliers
• Partnering with suppliers

Your customer report card

• Ranked needs
• Creating a breakthrough vs. your competitors
• Key measurements

New definition of sales and profits

Competitive Benchmarking

• Common form analysis
• “Close the Gap” programs
• Financial ratio analysis
• Common form analysis case study

Process Mapping and cost reduction

• Symptoms of inefficiency

• Functional and activity process mapping
• Procedural mapping
• Process design principles
• Reengineering methodology
• Operational performance metrics
• Process benchmarking and best practices
• Calculating costs for both activity and procedural maps
• Value analysis

Know your “true” costs

• Activity Based Costing
• Traditional managerial accounting
• Overcosting and Undercosting
• True profitability by product line
• Strategic decisions based on true costs

Out sourcing

• Key criteria for successful out sourcing

Strategic use of return on net assets employed

Cost of poor quality

• Calculating the cost of quality
• Prioritizing quality improvement projects

Overhead value analysis

• Preparation
• Developing the data base
• Generating ideas
• Review and remedies
• Plan of action
• Implementation

Streamlining

• Bottleneck elimination
• Duplication elimination
• Bureaucracy elimination
• Work simplification
• Error proofing
• Standardization
• Automation

Getting buy-in from employees

• Kickoff Speech
• Communication strategy and plan
• Involvement

Select the right cost reduction method that is right for your organization based on:

• Strategy
• Time frame
• Amount of reduction needed

Organizational Best Practices

• Putting a name and a face on every expense item
• Teaching an sharing financial information (open book management)
• Simultaneously improving quality, service, cost, and innovation
• Creating a flat organization
• Implementing team based approaches
• Financial incentives for cost reduction

Learn from your colleagues through small group exercises

Over 70 tips and suggestions you can put to use right now

Your own personal action plan

Testimonials

“Thank you for the excellent job you did presenting your course on reducing costs to the California Society of CPAs.  The staff reaction was the most positive we’ve had with outside training.  Thanks again for your fine work.”

Kristy Koberna, Associate Director, California Society of Certified Public Accountants

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