The best approach to continuous cost reduction

By Dr. Alin Posteucă

After the various improvements have been implemented, the total value of the cost improvement often seems to be high, but it does not seem to bring visible improvements in business results (especially competitive price, volume and profit).

Having spent a lot of time in several companies lately, the current challenges are:

  1. the need to lower the prices of the products has become more urgent than expected;
  2. the cost reductions cannot keep up with those of the competitors;
  3. the profitability of the new products does not fully contribute to the planned operational profit;
  4. certain categories of costs tend to increase continuously (raw materials, components, utilities, etc.);
  5. the volumes of products tend to decrease further in the future.

Even if cost reduction is often addressed by breaking down the top-down reduction goals for each division/product/cost structure, achieving these goals is not complete, timely and consistent because they are based on people’s experience and not a scientific approach (based on accurate measurements).

Are you sure you have the best approach to continuous cost reduction? Is the full potential for cost-effective reduction exploited?

Source: Alin Posteucă on LinkedIn

Dr. Alin Posteucă is the founder and CEO of Exegens®, a global consulting firm specialized in cost competitiveness improvement and operational excellence. It helps customers create and implement profitable strategies and cost improvement programs that ensure a unit cost improvement of at least 6% per year for each of the next 5 years by maximizing the efficiency and effectiveness of operations.

He is the author of Manufacturing Cost Policy Deployment (MCPD) concept, published in three books at Productivity Press – Routledge/ CRC, New York (USA). The latest, ”Manufacturing Cost Policy Deployment (MCPD) Profitability Scenarios: Systematic and Systemic Improvement of Manufacturing Costs” (October 2018) is based on its main belief that the annual and multiannual target profit can be achieved irrespective of the sales volumes, increasing or decreasing. He is also the co-author of the book ”Manufacturing Cost Policy Deployment (MCPD) and Methods Design Concept (MDC): The Path to Competitiveness”, published at Productivity Press New York (USA), 2017, as well as the author of the book ”Manufacturing Cost Policy Deployment (MCPD) Transformation: Uncovering Hidden Reserves of Profitability”, published at Productivity Press din New York (USA), February 2018.

Alin Posteucă has more than 20 years of experience in Cost Improvement consulting and training. He has a PhD degree in Industrial Engineering and a PhD degree in Economics.