Rethinking Cost Management In Retail And Consumer Goods

Rethinking Cost Management

To stay competitive, innovate, and grow, retailers need to invest in an increasingly powerful way to fund this through dramatic cost reduction. In the past, margin pressure in a cost-conscious consumer environment, such as Retail and Consumer Goods, drove companies to cut costs as a way to restore near-term margins. However, this approach of ‘shrinking to success’ has been mainly about improving the short-term financials, not necessarily securing the future.

We believe it is now time to go beyond traditional approaches and move to “smarter” cost transformations where processes, incentives, and mindsets are transformed and aligned to enable successful and sustainable operations at a dramatically lower cost level. Examples include changing the nature of supplier relationships and using emerging technology to increase automation. Drawing on more than 30 years of our experience working with consumer-facing companies across the globe, we offer a uniquely powerful, but pragmatic framework for cost reduction programs, which address all areas of cost. It is a holistic approach to cost transformation in our experience, which leads to sustainable results.

Our Expertise by Cost Area

Cost Transformations We reduce our clients costs by working with them to set up rigorous programs with tight control. These programs cut across the traditional buckets of cost reduction schemes in order to sustainably lower the cost base and offer a better customer proposition.	Goods For Resale From reengineering private label products and redesigning the supplier base to advanced negotiation approaches and tools, we are able to continuously secure better prices for the client and better products for the customer
Goods Not For Resale By implementing a targeted expense diagnosis on goods not for resale (GNFR), we apply efficient and effective sourcing actions (buy cheaper, buy better, buy less) to identify and implement sustainable cost reductions, which are directly linked to the P&L.	Head Office Cost Applying our zero-based organization (ZBO) and zero-based budgeting (ZBB) methodology gives us the ability to review, redesign, and rebuild the organization with a focus on the essential tasks. At the same time, we help our clients invest in strategic capabilities needed to grow.
Store Operations and Labor Our comprehensive insights into store operations, best-practice processes, and value adding services allow us to jointly design activity driven labor scheduling tools and world-class store processes. Our digital solutions ensure sustainability of programs and enduring benefits.	Supply Chain We understand supply chain as a value driving aspect of the business. We support our clients from strategy development to operational optimization and implementation. Our customer centric digital solutions enable clients to manage the growing complexity of physical and information flows.

New Perspectives on Cost Management

Identify organization interfaces with other organizations and create efficiency at these boundaries

Example: Logistics cooperation between the German discounter and its supplier. The two organizations are effectively managing the flow of goods through real-time data and sharing of freight space on cargo trucks. The supplier’s trucks supply products from the retailers DC and then load deliveries for their stores where they stop on their
way back to the suppliers head office.

Simplify and automate core retail functions by introducing AI / Analytics

Example: Artificial intelligence (AI), for instance, is a crucial component of leading online stores’ recommendation engines, which are responsible for a significant share of their revenues. AI analyses customers’ preferences and purchasing behavior to recommend purchases, dramatically reducing the need – and, therefore, cost – of labor for this task.

Apply a radical mindset to identify tasks that are really needed (‘survival minimum’) and build back from there

Example: An increasing number of companies are taking a zero-based approach to central costs. Rather than trying to reduce activities from the current set of operations, they identify tasks that are essential – the minimum needed for survival – and build back from there.

Rethink business model to reset the cost of doing business and thereby create disruptive business model and achievement of desired cost base

Example: Subscription-based models have redefined the coffee and shaving industries. They way consumers think about their meals has changed fundamentally because of home-delivery businesses such as Deliveroo. Who would have thought 20 years ago that your grocer delivers groceries not only to your home but in some test locations already into your fridge?

Create cost-conscious culture taking a holistic and systematic approach

Example: Some leading retailers have combined the decision making for their online and offline operations, allowing them to decide product listings from the perspective of their total business impact.