Consulting: Cost-Competitiveness Improvement for Building Target Profit Structure Reform

The Current and Future Challenges

We need an improvement in price competitiveness on the basis of a continuous and flexible reduction of unit costs

In our efforts to achieve business goals, we need to continually reduce the price and increase profitability, so that the cost reduction goals of the management are in line with the results we have achieved. Although we know that sometimes our main client has unit costs more on red, we can not prove this, we can not intervene effectively, and we can not answer exactly the question: How much and why of the past and ongoing orders costs have met their expectations?

We would like a reform of the current profit structure so we can intervene on the costs that are useless to our business

Even if our current improvements seem to have a significant impact on cost savings in some processes, we are not able to obtain reliable information on costs that have been reduced to our products and we can not properly assess the decision-making process regarding calculating profit and setting prices for each product. Often, without much justification, we have to answer questions such as: How many and how much of products have met their cost improvement expectations?

We are looking to reassess current methods because, even if we make improvements, they are not visible in the company’s financial results

We know that we have consistent cost reduction concerns for many years, we know we have competitors which make cost savings, we know that our suppliers tend to increase prices, but yet we can not have a system of assessing feedforward and feedback type cost improvements at budget and profit and loss statement level. Discussions often arise on:

  1. the financial visibility of the improvements made,

  2. allocating resources for improvements and

  3. different opinions among managers regarding the results of the improvements made.

It is important to involve all people in order to continuously achieve our cost reduction goals

Always, real and total involvment of people in improvements has been and is the key to success. On the other hand, have you ever thought that, in order to really involve people into improving costs, it is necessary to:

  1. properly manage resource allocation to fulfill cost reduction strategies (procurement, new products and manufacturing),
  2. deeply understand that the current level is not the last possible level of cost reduction and
  3. understanding that it is mandatory to apply other measures than the previous ones or those that could not be applied previously?

Exegens® Concept for Cost-Competitiveness Improvement

We help you develop a new management system that will make the competitive reform of the profit structure

Cost-Competitiveness Improvement Program with the help of Manufacturing Cost Policy Deployment (MCPD) is a new and innovative management system that develops competitive cost improvement targets at the company level, at every product family level, at product level, at department level and correlates these targets with the systematic and systemic improvement targets at the level of each product family’s processes based on the simulations of achieving a new necessary target profit structure. The scientific approach to cost improvement through MCPD leads to:

  1. scientifically identifying and eliminating unnecessary costs and implicitly eliminating improvements based on preconceived ideas and
  2. selecting the most profitable improvement projects, both effective and efficient projects and, implicitly, eliminating improvements based on assumptions.

Exegens® builds target profit structure reform to ensure sustainable competitive supremacy through cost

Based on the full support of productivity science, the purpose of the program is not to calculate costs but to reduce them scientifically, consistently and sustainably to meet annual and multiannual targets profit, regardless of sales scenarios (increasing or decreasing) and to achieve a competitive and profitable price level by clarifying the following:

  1. the required level of cost planning,

  2. the necessary level of cost-solving activities necessary for cost achieving and cost maintaining, and especially

  3. cost improvement activities and actions based on Cost of Losses and Waste (CLW) improvement towards ideal costs or Zero Costs of Losses and Waste (ZCLW) based on multi-annual productivity master plan and the development of a robust pro-cost improvement culture at all levels in the company and beyond.

MCPD Thinking for Traget Profit Structure Reform

Our Approach:

Innovative and competitive program of Cost-Competitiveness Improvement

As a first step in promoting the program, we will conduct a preliminary assessment (1-3 months). Then, on the basis of the results of this assessment, all the activities necessary for the introduction and expansion of the program by the MCPD team and the client team, a special team formed for this purpose for 6 months – 2 years, are developed. The goal is to ensure competitive supremacy through cost, through target profit structure reform, using the Manufacturing Cost Policy Deployment (MCPD) methodology.

Cost-Competitiveness Improvement Program: Assessment, Implementation & Expansion with MCPD Methodology

Expected Results:

Uncover the hidden profitability through real productivity

Lower costs are essential for survival. The key to the success of our program is to ensure the necessary target profit, while simultaneously improving costs, quality and delivery, to ensure the supremacy of the sustainable competitive price.

Here are the expected results of each phase of the implementation program:

Phase 1: Cost-Competitiveness Improvement Implementation Assessment (1-3 months)

  • A deep understanding of the cost structure and real opportunities for feasible reduction of production costs and subsequent costs of products.
  • A deep understanding of the need for innovation of products, processes, technologies, equipment and management systems.

  • Identifying the Cost of Losses and Waste (CLW) percent of total costs. Typically, Cost of Losses and Waste (CLW) accounts for 30-40% (sometimes about 50%) of the total cost of a production company and we seek to focus productivity improvement (through the development of multi-annual and annual productivity master plan) as close as possible to the ideal cost or zero Cost of Losses and Waste (ZCLW) for each Product Family Cost (PFC) and for the whole company.

Phase 2: Cost-Competitiveness Improvement Implementation and Expansion Program (6 months – 2 years)

  • Establishing core capacities for cost improvement and then implementing and sustaining these capabilities as a new way of life to make a significant contribution to business results: (1) at cost improvement level (firstly reducing production costs and then reducing the total cost of products) and (2) at the level of all business results.

  • Strengthen the company’s internal environment and improve the ability to respond effectively and efficiently to the new arena of global competition by undertaking systemic and systematic cost improvements that aim to maximize efficient and effective use of all resources (improving effectiveness or reducing losses — not effectively used input and improving efficiency or waste reduction – excess amount of input).

  • Ensuring cost improvement consistency by implementing and consolidating the 7 steps of MCPD to meet the demands for perpetual corporate prosperity.

  • Strengthen the company’s internal environment and improve the ability to respond effectively and efficiently to the new arena of business competition by undertaking systemic and systematic improvements to ensure consistent profitability.

  • Assessing the progress and the rhythm of improvement of current and new product costs (system information center for cost improvement), both at the budget level (through continuous assessment of the three types of improvement budgets) and profit and loss statement, as well as at the shoop floor level.

  • Developing a new, pro-cost improvement corporate culture and a ethos with a high level of motivation for systematic and systemic cost improvements and other dimensions of company performance.

  • Involve all people in the company and beyond in systematic and systemic improvement programs aimed at Zero Costs of Losses and Waste.

Thus, the growing business challenges (high quality, low price, more expensive equipment, more expensive utilities, shorter delivery times, uncertain demand, the need for many new and profitable products, etc.) require more than ever increased attention to productivity levels to ensure acceptable and sustainable profitability through a continuously improved cost. This way the target of reducing annual manufacturing costs by at least 6% for at least 5 consecutive years is achieved.

Contact us to learn more about how we can help your organization with our consulting and training services in cost-competitiveness improvement and operational excellence.