What is a good generic checklist/strategy/framework to use when cutting costs in a case to think about all the different ways to do so?

Bain BCG McKinsey
Recent activity on Oct 04, 2018
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Anonymous A asked on Oct 04, 2018

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Benjamin
Expert
replied on Oct 04, 2018
ex-Manager - Natural and challenging teacher - Taylor case solving, no framework

Hi,

As usual, no predefined framework that can be used everywehere. Common sens will for sure help more :)

If looking for cost reduction, you need to understand :

- what are the main cost of the company : so you need to understand the activity and think about the cost structure it involves. Depending on the business you could identify this with the value chain and / or the type of cost identification (labor, raw material, etc.)

- Focus your effort on the biggest cost categories : this will create more impact in absolute value. eg. 20% saving on 100M€ is better than 20% savings on 1M€ :)

- tackle each category one by one : starting with the biggest cost buckets

Hope this helps

Best
Benjamin

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Vlad
Expert
Content Creator
replied on Oct 04, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

I would recommend the following:

Structuring:

  • What is the cost composition and what are the biggest costs
  • Benchmarking of the biggest costs to find the improvement potential
  • Process improvements to meet the benchmarks
  • Costs and benefits of the proposed initiatives

The key concepts that you have to learn:

  • Internal / external benchmarking
  • Idle time
  • Core processes (usually are optimized) and the supporting processes (usually are cut)
  • Math structures (Frequency of operations * time per operation)
  • Other useful structures (e.g. people - process - technology)

Feel free to reach me for further help with these cases.

Best

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Benjamin gave the best answer

Benjamin

ex-Manager - Natural and challenging teacher - Taylor case solving, no framework
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