Reducing direct costs


What we do

Direct costs (should) reflect the business model. To attack costs, you need to understand the shape, size and characteristics of the business. Our starting point is to ask some straightforward questions.

  • How are customers won, served and retained?
  • What are the main sources of sales and profit?
  • What are the main business processes? What resources do they use?
  • What models are used to cost and price products and services?
  • What is the culture of managerial accountability and reporting?
  • Are there effective controls on costs?
  • Are there effective incentives for controlling/reducing costs?

How we do it
A systematic analysis reveals the options for action, determines the priorities and ranks each opportunity for savings. Collinson Grant uses a formula that assesses what work needs to be done; how this is broken down into tasks; how long each should take; what allowances should be made for supervision, management, training etc; what support functions are necessary; and what their cost will be.

We use this data to develop a cost model of the organisation. This is used to discuss with managers how improvements can be made. There is always a risk that old efficiencies and duplication are replicated in the new design. This is particularly the case when the work is complex, with few repetitive transactions and no directly relevant comparators. It is important to ensure that judgments are made on objective reasoning rather than subjective criteria. This approach - using 'appraisal of work content' is only one mechanism for routing out unnecessary cost. We also help managers to reduce costs by:
  • applying lean principles and six sigma
  • reviewing core, customer-serving processes
  • examining employment practices
  • getting better utilisation from technology
  • eliminating redundant operating sites and plant
  • managing procurement more efficiently
  • achieving the optimum organisational design.

Our experience

Collinson Grant’s expertise in reducing direct costs quickly and efficiently has been applied in many different sectors and with our clients throughout mainland Europe and in North America. Sometimes we are recommended to a company’s managers by its owners (venture capital holders or other investors). Sometimes we are asked to act promptly to restore a business’ profitability following a change in market conditions or other unexpected event. Our approach is to work alongside managers – highlighting, testing and confirming the opportunities for savings. Once a target is agreed, we develop a plan to realise the changes and then support the organisation throughout its implementation.

 

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