Cost Reduction

Overview

The Callidon team has helped a wide range of companies to identify and, more importantly, realize significant savings through significant reductions in their cost positions. Combining rigorous analysis with pragmatic business judgment, we are able to ensure that opportunities are identified, savings implemented, success tracked and targets realized.

Strategic Challenges

Companies often seek to drive cost reduction using a top down approach, such as mandating a 15% cost reduction across each department. This approach inevitably fuels internal resistance to any and all reductions, based on the fear that the savings will disproportionately fall on a particular area or department.

Top-down approaches therefore frequently fail to achieve the organization’s cost reduction goals and always fail to match the cost reductions with the underlying opportunities in each department. In turn the likelihood of either cutting too deeply, with the associated risk of operational failures, customer defections, and product gaps, or of insufficient reductions, is significantly increased.

Conversely, pursuing a pure bottoms-up approach, without setting specific targets for each business area, is likely to yield savings far short of the true opportunity.

At Callidon, we strongly advocate a systematic approach to setting cost reduction goals and to identifying opportunities. Our approach starts with a rapid, but systematic review of the business coupled with high level benchmarking of the key functional areas. This allows us to develop sensible cost reduction hypotheses and to set specific cost reduction targets. This is followed by a detailed but prioritized bottoms-up process in which we work with management to analyze and flesh-out the actual size of the each opportunity and to develop a detailed implementation plan.

At Callidon, we have extensive experience working at all levels of organizations and across different departments and business functions to maximize savings. We are used to committing to targets and working under tight deadlines and to adapting our approach to fit the unique culture of each client organization.

Typical Activities

• Conduct high level review, to enable initial target setting
  • Internal and external benchmarking
  • Span of control analysis
  • Analysis of historical cost growth, relative to key cost drivers
• Set detailed targets by area / function
• Conduct deep-drill analysis into sub-set of high priority areas, including:
  • Activity based costing
  • ROI analysis
  • Outsourcing analysis
• Develop execution plan and put in place tracking and recognition process, including:
  • Specific targets
  • Milestones
  • Individual responsibilities
  • Contingencies
  • Report out process