Practical example
Indirect Spend Optimization
Our client, a manufacturer of commercial vehicles, has implemented an Operational Excellence program to safeguard and increase profitability.
Background
One of the program’s sub-initiatives focused on optimizing (indirect) overhead costs. The project approach initially chosen—which involved using benchmarks alone—did not yield the desired results and was abandoned. Under a new approach, opportunities to close the performance gap had to be identified and agreed upon within three months.
The biggest challenge was that we were joining an already ongoing program with ambitious goals and a tight timeline. This was further complicated by an already highly optimized cost structure and the large number of departments and stakeholders involved.
Specific task
- Planning and conducting cost review meetings and workshops in direct and indirect departments to identify cost-saving measures
- Conducting cost analyses and evaluating identified cost-saving measures
- Implementation of selected measures
- Coordination and agreement on measures, as well as regular reporting of inventory levels to top management and the executive board
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KBC's Approach
The detailed analysis of cost drivers provided a transparent basis for systematically identifying potential cost-saving measures. Given the tight timeline, systematic preparation of the project was essential. As part of the process of validating and narrowing down the relevant cost types and items, the respective budget and cost managers were identified and involved. In dedicated workshops, the project approach was detailed and explained to ensure that all necessary project stakeholders and management were “on board” from the outset.
During the analysis phase, the volume drivers for (historical) cost trends were examined by cost category. These served as the basis for the data- and hypothesis-driven development of cost-saving measures.
The cost-cutting measures were implemented according to the same plan for both the plants and the management functions:
- Standardized preliminary cost analysis
- Derivation of initial findings, particularly through interdepartmental analysis of actual and planned costs
- Dialogue based on levers and volume drivers (KBC catalog of measures)
- Identification and prioritization of cost-saving measures (ideas)
- Documentation and approval of the generated ideas as a basis for further evaluation
In the final phase of the project, the proposed measures were evaluated and prioritized. Agreed-upon measures were monitored through to their implementation. This process was based on custom-defined overviews of the measures, which included a financial assessment as well as a description of the expected effects and potential risks.
