Outside Case In Point's segmentation of cost imporvement ideas by labor, production, and finance, what are some other interesting ways to segment cost-focused profitability ideas?
Thank you so much, Clara!
Interesting Ways to Segment Cost-Focused Profitability Improvement Ideas
Overview of answers
Upvotes
Best answer
Hi there,
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.)
- Cbsolescence (wrong word...this is amortization/depreciation)
- Stolen objects (but shocked you heard this in a case)
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 (why wasn't this included? Big one to miss)
Was this answer helpful?
The more simplistic and arguably more tailored approach is to take the top 3-5 largest cost buckets of the business and think about how you can reduce the unit cost and/or volume. For example, fuel cost is a major cost item for an airline. Firstly, volume (i.e., consumption) can be reduced through better fuel efficiency programmes (e.g., pilots trying to fly more fuel efficiently, more fuel efficient aircraft, etc.). On the other hand, although limited, you can reduce unit cost by negotiating/changing suppliers or hedging.
Another segmentation I would think about to be expansive in your idea generation is to think about both direct and indirect costs to the business of which there is a sub-segment of procured costs which is you can think about from a supply-driven commercial (e.g., negotiating with suppliers) as well as demand-driven technical (e.g., changing the specifications) and process (e.g., procurement process) levers.
Was this answer helpful?
Hello!
I would not recommend you to think about cases in this "generic" format. Instead, I suggest you to post here the real case where you are being asked to problem-solve Cost-Focused Profitability Improvement Ideas, and we can help you out with the ideation.
Hope it helps!
Cheers,
Clara
Was this answer helpful?
A marketing and publishing company is considering developing a new magazine as it has received information that this business line may be interesting, but is unclear about profitability. Analysis shows that profit per subscription is exactly $0. The next step is to suggest profit maximizing ideas.
(edited)
I'm segmenting profit improvement ideas into: 1-Revenue: segmented by short term and long-term ideas 2- Cost: segmented by labor, production, and finance
The cost segmentation is the one recommended by Case in Point. I just worry that every candidate will begin to sound the same, and segment in the same ways because we're all using the same prep material.
This is why I was curious about alternative ways to segment cost improvement ideas. Thank you
Related Cases
Company case by Oliver Wyman
I’m thinking about setting up a wine cellar in my basement. The way I see it, shelf space would be divided into two sections: (1) a “drinking” section where I store bottles for my own consumption and (2) an “investment” section where I store bottles that I intend to sell at a profit after they
...
I’m thinking about setting up a wine cellar in my basement. The way I see it, shelf space would be divided into two sections: (1) a “drinking” section where I store bottles for my own consum
...
(Open whole case)
104.7k
Times solved
Beginner
Difficulty
Company case by OC&C
Style:
Unser Kunde, Schmuck Agentur, ist ein führender europäischer Fachhändler für Accessoires und Schmuck. Der Kunde ist derzeit nur in Europa aktiv und vertreibt sowohl Premium- und Luxusprodukte, meist von europäischen Marken, als auch "Mid-Market" Produkte, die eher der hauseigenen Marke angehören. De
...
Unser Kunde, Schmuck Agentur, ist ein führender europäischer Fachhändler für Accessoires und Schmuck. Der Kunde ist derzeit nur in Europa aktiv und vertreibt sowohl Premium- und Luxusprodukt
...
(Open whole case)
13.8k
Times solved
Intermediate
Difficulty
Company case by thyssenkrupp Management Consulting
Your client tk Commodity Trade (tk ComT) is a global materials trader - they buy and sell raw materials. tk ComT had stable EBITDA margins in recent years. They consider expanding their target market and entering the Lithium (electric vehicle battery grade) trade, due to the current high demand for
...
Your client tk Commodity Trade (tk ComT) is a global materials trader - they buy and sell raw materials. tk ComT had stable EBITDA margins in recent years. They consider expanding their targ
...
(Open whole case)
12.8k
Times solved
Advanced
Difficulty
Style:
You have been hired to support the owner of a bike-shop as a business consultant. The bike-shop has suffered a significant revenue decline during the last year, and now the owner would like you to assess the situation and options for the way forward.They want to know last year’s profit, i.e. ho
...
You have been hired to support the owner of a bike-shop as a business consultant. The bike-shop has suffered a significant revenue decline during the last year, and now the owner would
...
(Open whole case)
78.5k
Times solved
Beginner
Difficulty
Style:
Your client is a pharmaceutical company which is worried about the portfolio optimization of their R&D projects.They hired us to investigate it and help them make the most return of their R&D investments in the short and mid-term (without totally forgetting the long-term horizon).How wo
...
Your client is a pharmaceutical company which is worried about the portfolio optimization of their R&D projects.They hired us to investigate it and help them make the most return of thei
...
(Open whole case)
60.3k
Times solved
Intermediate
Difficulty
Content Creator
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate
1,094
Meetings
77,155
Q&A Upvotes
232
Awards
151 Reviews
