Total Cost Efficiency

We help you gain control over your total costs and turn it into a source of competitive advantage.

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Optimizing only variable costs can be dangerous

Variable costs related to material and labor are relatively easy to link to products or services – but costs that occur after a delay or are related to multiple products or deliveries can cause blind spots. Such costs include for example distribution, reverse logistics, end-of-life excess and marketing. 

Allocating these costs evenly to all products and services can be dangerous, as they are not caused evenly. Taking a more proactive approach to understanding total costs can open new opportunities for gaining an advantage over competitors, or even for entering new markets.

Make total cost efficiency a source of competitive advantage

Cost erosion

Capture cost erosion

Often the most significant cost element is procured material costs. Such costs are typically considered static and negotiated periodically with the suppliers, with few active measures taken to optimize them.

Proactive companies use cost breakdowns to validate the right starting price and aim for steep cost erosion and use supplier portfolio management to ensure adequate competitive pressure between suppliers. Risk-sharing can also be used to form win-win business models aligning life-cycle profitability for both the customer and the supplier.

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Optimize for long-term profitability

Many companies are extremely sales-driven, and management moves mountains in the pursuit of sales opportunities and growth. If such companies cannot account for all the costs triggered by these sales efforts, they will not be able to pinpoint where the costs and risks of pursuing the opportunities outweigh the possible gains.

In contrast, companies which manage their full profitability can decide to occasionally forgo short-term revenues and optimize their long-term profitability over short-term top line growth.

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Profit from price points competitors cannot reach

The ability to optimize profitability after total costs can even enable the creation of new and profitable business using price points that competitors cannot reach.

This requires identifying all costs and their triggering activities on an extremely detailed level and then running the new innovative business in a fundamentally different way to prevent triggering any unnecessary costs.

Key benefits of total cost efficiency

Total cost efficiency enables

  • Securing the right starting price
  • Steep cost erosion roadmap
  • Optimized life cycle total costs

Efficient procurement secures

  • A supplier base with the required competencies and technologies
  • Supplier base that does not impose ethical and environmental risks
  • Suppliers who can deliver high quality with minimal waste
  • Suppliers who can guarantee supply robustness, consistency and flexibility

What we do?

Examples of specific areas where we can help you:

  • Creating a game plan for total cost efficiency – identifying the cost elements and what triggers each element, quantification and assigning of the costs on a product and customer level, development of a pragmatic game plan and putting it in action.

 

 

  • Enhanced procurement maturity – strengthening your processes, putting in place clear roles and responsibilities and real-time analytics to free up your sourcing experts time from ad-hoc practicalities to forward-looking total cost optimization.

How we work with you - From a business case to measured sustainable results

We tailor our projects according to the specific needs of our customers.

  • Begin by understanding the customer’s business and specific needs to make sure we are solving the right problem
  • Hands-on collaboration with the customer’s team

 

 

  • Fact-based approach, based on both quantitative and qualitative analysis
  • Weekly project & change management with individual coaching

Read more how we work with you

Book a meeting

Should we discuss how you could gain control over your total costs? Book a meeting with Mikko Myllys or send us a message and let’s find out together!


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