Cost Optimization: A Key to evaluate business expenses

Cost optimization is a business-focused, continuous discipline wherein, its purpose is to drive spending and cost reduction, while maximizing business value. The key to effective cost optimization is to have proactive processes in place as part of business development to continually explore new opportunities. These include:

• Obtaining the best pricing and terms for all business purchases
• Standardizing, simplifying and rationalizing processes and services
• Automating and digitalizing business operations

Sustainable cost optimization must focus on the following areas:

1. Targets and benchmarks: Comparison of organizational spending with peers through external benchmarks.
2. Accountability of business units and individuals: Fostering a culture of commitment to cost optimization by clearly communicating which areas to focus on when proposing Cost optimization ideas to leadership. This includes focusing on strategic cost reduction where resources are shifted from low returning businesses towards higher value & higher return opportunities.
3. Managing demand and supply of costs: Categorizing costs linked to both supply and demand to prioritize organization’s cost optimization efforts.
4. Leveraging savings to drive enterprise strategy: Executive leaders should be proactive not only in optimizing costs but also linking the reinvestment of savings to business outcomes.

Benefits of Cost Optimisation:

1. Definite Increase in margins
2. Better deliverables at a lower cost
3. Enhanced competitive advantage that will stimulate business operations
4. Better utilisation of costs to expand operations and strengthening the position in the industry
5. Improved relationships with Suppliers
6. Maximising value to business stakeholders through increased profits and distribution of dividends

Relevant Considerations:

Some of the most relevant considerations which should be included in the Cost Optimization process are:

1. Availability of a cost optimization strategy in the company and ensuring proper awareness amongst the employees
2. Availability of policies and procedures at a functional level with a robust review mechanism at defined intervals
3. Conducting market research for rate benchmarking during procurement process including new vendor development
4. Establishment of a vigorous Supply chain Management for the operational effectiveness of processes, considering the segregation of duties at each department level
5. Outsourcing non-critical business functions to enhance efficiency and leverage quick hits to fund longer term opportunities

MBG (“MBG Corporate Services”) offer service Cost Optimization for the Companies under the Service “Business Health Check” in the combination of below package:

• Identification of areas with exposed risks available in process environments
• Identification of areas where Company is potentially loosing cost or where Company can/could save cost
• Identification of areas of non-adherence in defined process or gaps in Process Level.

If you want to talk with our experienced Risk Advisory Services domain experts at MBG Corporate Services can help you through the entire Cost Optimization Services.

Contact us to know more.

Please email us :- [email protected]

or contact us on +91 88601-90008

Read Our Service Deck:- Cost Optimization

Article contributed by:

Saurabh Srivastava

Sr. Manager – Risk & Transaction Advisory Services