Conducting a cost optimization approach is virtuous. However, the latter may be in vain if the project fails before or during implementation or if the savings evaporate afterwards. Some tips to overcome the risks on the way to cost optimization.
More than three quarters of optimization projects never reach their initial goals. Between the decision to launch and the concrete recovery of savings, many risks threaten the project. The identification of risks, as well as their treatment make it possible either not to consume resources unnecessarily by not launching certain projects, or to considerably increase the chances of success. The list of these risks is long, so here is a focus on 3 risks encountered regularly.
Obstacle n ° 1: Presence of obstacles from the start
One of the main risks is already simply not being able to start the cost reduction campaign. There may be many reasons for this: too much dependence on a supplier, perception of insufficient savings potential, fear of internal impacts, lack of time, and sometimes even a combination of these factors.
Take the case of the apparent lack of potential with dependence on suppliers. Beyond objective dependence, there is also very often a subjective or emotional dependence: “we have been working with him for a long time” or “he knows how to be accommodating”,…. everything that the supplier can do very well to make himself unique and indispensable! We must therefore be able to overcome subjective dependence. For this, we can rely on a benchmark, a comparison of the prices of the different providers on the market. The provider may be favored but remaining within market prices.
Obstacle n ° 2: Poor framing of the project
An insufficiently precise project scope and responsibilities can generate serious misunderstandings or even resistance. This resistance can come from a site manager or an operational. Most of the time, they come from the fact that this person has a bad perception of the project. However, the project will be difficult to carry out without the support and involvement of this person. To succeed in generating this commitment from everyone to the project, it is important to establish internal communication, as early as possible, to inform all contributors about the project, their role and their contribution. The framing of the project is necessary for clear and effective communication.
3 ways to structure a project
Three components will make it possible to frame a cost reduction project: first, the very definition of the project (issues, objectives, planning, roles and responsibilities), second what can be challenged and what can only be challenged with more difficulty (for this it is necessary to carry out a detailed analysis of the budget lines, to audit and to know how to exclude certain perimeters) and thirdly, to validate that other initiatives will not call the project into question.
If the project is threatened by other priority internal projects, then perhaps the start of the project should be questioned. These priority conflicts can be generated by the implementation of a new ERP, a new regulatory constraint, a move… They should be anticipated!
Obstacle n ° 3: Choice of resources
Some categories of expenses require less expertise than others. For example, the purchase of office supplies does not require special knowledge of the legislation, or of the technical specifications of the products, moreover there is easy access to service providers, even urgent requests, supported by numerous catalogs and gifts! That said, it must be recognized that even in these categories requiring little expertise, a good knowledge of these purchases makes it possible to go even further by knowing the price levels that can be achieved by improving the processes or by redefining the need.
For many other categories of expenditure a solid level of knowledge and experience is required. It may be a question of knowing how to analyze possible insurance coverage failures, or of having a complete vision of the costs for the vehicle fleet (by integrating, for example, the weight and the constraints of taxation).
More generally, the errors often encountered in a company are among the following: inaccuracies or even dead ends on operational or even legal aspects or the failure to take into account hidden costs. This involves, for example, having neglected in the analysis the penalties for breach of contract, the possible costs of taking back the equipment. The lack of questioning of what already exists (this questioning is not necessarily necessary but it is sometimes the main way or the only possible way for significant optimizations). Or, supplier casting errors (for example choosing a supplier with a heavy structure when you need reactivity).
The skills to have
To optimize purchases, it is necessary to master multidisciplinary skills. It is necessary to combine technical knowledge on the services or products in question, knowledge of the procedures in place in the company, knowledge of supplier markets for each product or service and the ability to manage a project and bring it to fruition. Beyond the issue of competence, availability is fundamental. Renegotiating a contract or following up on a quarterly basis doesn’t take 15 minutes!