ROI-EFESO COST REDUCTION PROGRAM
Cost reduction programs are both a sprint and a marathon. Many initiatives start with high ambitions, but underestimate the hurdles of implementation. As a result, successes are short-term at best and are not reflected in the profit and loss statement (P&L).
ROI-EFESO offers a tried and tested approach to optimizing cost structures along industrial value chains, which combines rapidly effective cost savings with a sustainable streamlining of your processes. In doing so, we are guided by three criteria with which we secure the performance and further development of your value creation processes in the long term:
- Process excellence: the central driver for the cost base.
- Flexibility: those operating in volatile markets must be able to respond to sales fluctuations or new, competitors at any time.
- Resilience: cost reduction programs must specifically take disruptions such as interrupted supply chains into account.
Project: Product cost reduction in the business unit of a family-owned company (1 billion turnover worldwide p.a.). Holistic cost reduction programme to stop losses and sustainably improve processes and organisation.
Results: Introduction of a shop floor management as well as production planning led to a
- Productivity increase of 22% in the direct and indirect areas
- Reduction of backlog by almost 100%
- Reduction of internal defect costs by more than two thirds
- Introduction of premium wages
- Reduction of consumables by 10%
- Increase in inventory turnover rate by 40%
The implementation of a one-piece flow on the assembly line resulted in an increase in the
- EBIT margin by +8.5%
EVA margin by +7% after one year.
3-step Approach – ROI-EFESO Cost Reduction Approach
Our experts develop a customized cost reduction program for your organisation that delivers both levers for fast-acting savings effects and effective long-term improvement measures.
In an integrated top-down/bottom-up approach, we first identify and evaluate the cost and expense drivers along your value chain and in indirect areas. We then derive suitable measures to realize the identified cost reduction potentials and accompany their implementation in agile sprints. Through continuous monitoring and bridging of the savings potential into the income statement, we ensure the success of implementation and the effectiveness of the measures in the balance sheet.
Phase 1: top-down/bottom-up assessment
At the beginning of the program, the ROI-EFESO team analyses the cost structure within the organisation. Based on the income statement and internal cost accounting, we identify cost drivers, compare planned and actual data and derive cost targets for your organisation (top-down). In doing so, we use the following instruments, among others:
- Cost structure analysis for identification and weighting of cost blocks
- Allocation of cost drivers to sub-processes, e.g. via value driver trees
- Trend analysis: presentation of cost structures and cost blocks
- Sensitivity analysis to determine P&L effectiveness
In parallel, we look at the central functional areas such as production, supply chain management, procurement or R&D in order to identify possible weak points, derive initial measures and quantify the resulting savings potential (bottom-up). In doing so, we look at the following cost reduction levers, among others:
- Reduction of waste and shortening of lead times
- Consolidation of the supplier base
- Review of make-or-buy decisions
- Review of costs in indirect areas (zero-based approach), process flow analysis (Makigami)
Phase 2: continuous variance management
This is followed by a comparison of the identified savings potentials with the organization's cost targets in order to derive a resilient roadmap. Here we focus on these results:
- Evaluation of the measures with regard to their impact on financial statements and relevant financial indicators, implementation time and implementation effort (incl. costs & investments)
- Preparation of a prioritized measures roadmap
Phase 3: implementation management & controlling
Phase 3 comprises the systematic implementation and continuous performance measurement of the defined cost reduction measures. The ROI-EFESO team accompanies you in an agile approach and ensures the effectiveness of the measures through close-meshed controlling. The following activities are in the focus:
- Fast, pragmatic and short-cycle implementation of the measures in agile sprints with a system of degrees of hardness
- Monitoring of implementation success and its P&L effectiveness
- Continuous identification of further measures to achieve the defined savings targets
Cost reduction/restructuring due to market changes
A plant and mechanical engineering company had to ensure its competitiveness. ROI-EFESO identified all the adjustment screws for the necessary changes at a production site in Germany and got the turnaround going with a multi-layered restructuring approach.
Champions do not rest contentedly with their success, but always have their sights set on the next milestone. A technology group with around 20,000 employees at over 16 locations worldwide is also orienting itself in the direction of such a “North Star”. His starting points: an operational strategy and the initiatives derived from it, which should be implemented at every location in order to make them even more efficient.
Value and Cost Engineering
Cost transformation from premium to volume provider. Mass manufacturers who expand their product portfolio into higher price segments are not uncommon. A premium manufacturer of refrigeration appliances, on the other hand, takes the opposite approach. What seems banal from a technological point of view is an enormous challenge from a cost perspective. ROI-EFESO accompanied the company in this demanding transformation project.
Safeguarding the site thanks to lean value streams
With hard targets for the entire operations area, a valve manufacturer is aligning a plant location for the future - and thus securing the site in Germany. Together with ROI-EFESO, the company restructures its manufacturing and logistics and achieves, among other things, an OEE of more than 85%.