Companies have continuously tried to improve their cost positions over the past years and many have succeeded in improving their fundamental value. A great deal of the improvement has been achieved by managing costs. However, costs are not static--if an organization's initiatives succeeded in reducing costs in yesterday's business environment, there is no guarantee its success will carry over to today.
Our view is that managing operational costs is an ongoing managerial task: supplier contracts come up for renewal (input materials, fuel, temp labor) and the marketing profile of your target markets changes. Our operational improvement practice focuses on helping managing costs specifically in these areas and on comparing your performance to your industry peers. Our approach looks at possible immediate improvements, risks, longer term improvement, and operational assumptions going forward.
For example, in looking at marketing costs we consider the costs of the channel mix, the determinants of profitability for the target customers, costs of production (paper, ink, media, labor, distribution), seasonality, and other determinants of costs. We apply quantitative methods such as regression analysis as well as qualitative judgment to formulate our insights and recommendations.
In dealing with the value of contracts, we analyze and perform valuations for the major contingencies stipulated in your contracts and also work with you to find what risks you are willing to undertake and which risks you would like to sell. That may form the basis for a contract renegotiation which we can help analyze, frame, and facilitate.