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 a consultant in productivity and profitability, CEO of Exegens® and the author of Manufacturing Cost Policy Deployment (MCPD) and Speed-Based Target Profit (SBTP) concepts. His major research areas include manufacturing policy deployment, manufacturing cost improvement and visible profitability of operational excellence by improving productivity. His recent research includes the impact of Industry 4.0 on planning and developing synchronous profitable operations and on information systems of cost and budget in order to substantially improve the operational unit costs.

He has been actively involved in various industrial consulting and training projects for more than 20 years, delivering training/ workshop programs in Productivity, Innovation, Business Transformation and Leadership for over 5,000 participants.

He has a Ph.D. in Industrial Engineering and a Ph.D. in Managerial Accounting. He has an MBA Degree and a BA Degree in Accounting and Computer Science and he is certified Public Accountant in Romania. He has published in various research journals and presented papers at numerous conferences and congresses regarding Productivity, Profitability and Industrial Engineering.

Dr. Alin Posteucă is the author of Manufacturing Cost Policy Deployment (MCPD) and Speed-Based Target Profit (SBTP) concepts, published in four books at Productivity Press – Routledge/ CRC, New York (USA).