An international consumer goods company experienced a significant slump in sales in 2020 - partly due to the coronavirus crisis - in its previously flourishing business. In order to optimize cost development, the company commissioned the interim manager. His task: to analyze all costs as well as manage and implement a cost reduction program.
Causal presentation of costs creates basis for cost analysis
The interim manager began the mandate by reviewing all costs, i.e. product costs, personnel expenses and other fixed and overhead costs. In order to develop a targeted program to reduce costs, it was necessary to prepare the costs as clearly as possible.
During the analysis, the interim manager determined the product costs according to the product specification separately for ingredients and packaging materials as well as production costs. A breakdown of personnel costs by cost center was quickly downloaded from the ERP system. However, the allocation to functions still had to be adjusted to make it comparable. The interim manager's experience as a controller and finance director made it easier to map material and overhead costs by cost type.
Cross-functional teamwork for continuous reduction of product costs
After the analysis, the interim manager put together a team from finance, development, purchasing, production and marketing. Together with the managers, they agreed on an overarching cost reduction target. Achieving the target was additionally rewarded as part of the variable remuneration.
In the next step, the team members began to systematically examine the product costs in their own portfolio and in comparison with the competition. Potential for optimization was identified - and corresponding task packages were assigned. This led to new processes that better integrated the individual departments. Changes in wording were now tried out and tested by the development department, for example. Marketing then checked for possible customer acceptance. At the same time, Purchasing took on the task of involving suppliers in the development process at an early stage in order to use their innovative strength to improve the specification. At the same time, purchase prices were scrutinized and price reductions negotiated. This approach has proved so successful that it has become a continuous improvement process.
Cutting fixed costs through leaner processes (lean) and benchmarking
Despite all the improvements in production and sales, it was not possible to implement a sufficient cost-cutting program without cuts in personnel costs. The situation did not (yet) require radical restructuring. In any case, the company had opted for a cooperative approach in order to avoid unnecessarily straining the working atmosphere. In order not to strain the motivation of the employees through an unnecessarily long phase of uncertainty, the interim manager did everything in his power to push ahead with the cost reduction program as quickly as possible - and in this way create clarity for everyone involved.
In order to reduce the fixed costs in the personnel area, the interim manager reviewed the individual cost centres for potential together with those responsible. On this basis and using benchmarking, the interim manager drew up a list of possible measures, which was presented to the Management Board and implemented step by step. These included specific personnel reduction proposals and two outsourcing approaches.
New purchasing strategy as the basis for "indirect costs"
After the product costs and personnel costs had been addressed, the interim manager worked with the strategic purchasing department to tackle "indirect costs" in order to exploit possible cost reduction potential here too. To this end, the purchasing strategy was fundamentally revised on the basis of a spend analysis. In future, strategic purchasing will focus on the most important materials and services according to an ABC classification. In the B categories, costs were optimized in individual projects with the temporary assistance of external experts wherever possible. The company's own resource requirements were kept to a minimum.
As a result, the company was significantly more efficient and flexible on the cost side after the interim manager's restructuring assignment, enabling it to cope better with future crises.
