Is there a general framework we can use to brainstorm ideas on decreasing costs (like how you can break up increase profits into increase revenues or decrease costs)..it seems hard to provide breadth and depth of ideas when it comes to costs
Get Active in Our Amazing Community of Over 452,000 Peers!
Schedule mock interviews on the Meeting Board, join the latest community discussions in our Consulting Q&A and find like-minded Case Partners to connect and practice with!
Decrease costs framework
Overview of answers
Upvotes
Best answer
Hey,
I completely see where you are coming from. Cost Reduction is such a broad area and in the real world it generally is a big focus at the moment. Cost reduction can span the entire organisation or in a particular area such as IT, HR etc.
For such cases and depending on the case prompt and details they give, you can use the FC and VC model and drill in from there or use an alternate approach below that I teacht my candidates.
Any company that operates in any industry will have following layers:
- Customers they sell to (B2B or B2C)
- Channels to sell to those customer (e.g. retail, online etc)
- Product & Service to sell through those channels to the customer
- All underlying processes
- Data to enable the processes
- Technology/Tools to execute the processes
- People & Organisation
- Physical assets (offices, warehouse, stock etc)
So, again depending on the case you can pick each of these layers and come up with ways to reduce cost. E.g. in Channels use AI to reduce customer care costs, or reduce IT spend in the Technology layer. Hope you get the point.
Go a step further and prioritise your cost reduction cost into quick wins, medium and long-term and also provide a lever of complexity for actually implementing them.
Feel free to send me a message if you wish discuss further.
Was this answer helpful?
COST ISSUES
In general, for determining cost issues, you need to break down the problem into a tree/root-cause analysis and ask the highest level (but specific) questions first! In this way, you essentially move down the tree.
How do you identify where to look? Well, you need to look into whichever of the following 5 make the most sense based on where you are:
- What's the biggest? (i.e. largest piece of the pie...most likely to change the end result)
- What's changing the most? (I.e. could be driving the most and most likely to be fixable)
- What's the easiest to answer/eliminate? (i.e. quick win. Yes/No type of question that eliminates a lot of other things)
- What's the most different? (differences between companies, business units, products, geographies etc....difference = oopportunity)
- What's the most likely? (self-explanatory)
https://www.preplounge.com/en/consulting-forum/structure-breakdown-for-costs-7963
https://www.preplounge.com/en/consulting-forum/inventory-costs-how-to-segment-6861
Major Costs - Areas to Cut
FC
- Rent
- Labour (salaried employees)
- Transport (if we own the trucks, etc.)
- Capex
- Utilities (for the office, warehouse, etc.)
VC
- Labour (hourly employees)
- Transport (if we pay a company per load)
- Fuel/truckers (if we own our own trucks etc. for transport)
- Utilities (if you need more energy to make more widgets)
- Raw Materials
(edited)
Was this answer helpful?
Hi there. Depends on client's role in the supply chain, some has fairly simple cost structure (e.g. the company simply buys completed products and sell them to customers) and others have more complicated cost structure (e.g. if the company both produce and sells).
While breaking cost down by fixed cost and variable cost works for many cases, for companies with more complicated cost structure, I always recommend breaking cost down based on value chain, which varies company by company, industry by industry.
If you come across an unfamiliar industry and you don't know what would be the key component of its value chain, you can always start a conversation with your interviewer and ask he/she can provide this information to you.
Hope this helps!
Was this answer helpful?
Related Cases
Expert case by Francesco
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US.The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadv
...
Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US.The mission of SmartBridge is to help as many stude
...
(Open whole case)
31.7k
Times solved
Advanced
Difficulty
Expert case by Francesco
Style:
Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
Our client is a BlissOttica, an Eyewear Manufacturer that is looking to reach a 10% increase in profits. How would you help our client?
(Open whole case)
13.7k
Times solved
Intermediate
Difficulty
Expert case by Casper
Style:
Our clients are two beer manufacturers from a well-developed country who just decided to merge. We can call them Company A and Company B. The decision about the merger has already been taken and our clients are certain it will soon be approved by regulators.What is expected from you is to help
...
Our clients are two beer manufacturers from a well-developed country who just decided to merge. We can call them Company A and Company B. The decision about the merger has already been taken
...
(Open whole case)
7.4k
Times solved
Advanced
Difficulty
Expert case by Raj
Style:
Your client is the CSO of LightFast, a Middle-Eastern telecoms and media player. They are a national incumbent player who expanded operations into South-East Asia and North Africa in late 2010s. Their operations in Indonesia include pay-TV and fibre-optic broadband. However, the broadband busin
...
Your client is the CSO of LightFast, a Middle-Eastern telecoms and media player. They are a national incumbent player who expanded operations into South-East Asia and North Africa in late 20
...
(Open whole case)
6.1k
Times solved
Advanced
Difficulty
Style:
Your client is an international Corporate & Investment Bank (CIB). It is France based and has already expanded to Poland (Warsaw), Asia and Americas. Your client now wants to look into the development of the existing hub in Warsaw and is contacting you to help him assess this option. How would y
...
Your client is an international Corporate & Investment Bank (CIB). It is France based and has already expanded to Poland (Warsaw), Asia and Americas. Your client now wants to look into t
...
(Open whole case)
2.0k
Times solved
Intermediate
Difficulty
Content Creator
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience
176
Meetings
14,284
Q&A Upvotes
99
Awards
70 Reviews