As CEOs, we are often tasked with steering our organizations through turbulent waters of profitability challenges and market share losses.
This was the scenario faced by a global FMCG company grappling with high operational costs and a complex organizational structure that was stifling its competitiveness.
Here's how they undertook a large-scale cost transformation to streamline operations and reclaim their market position.
The Challenge
Faced with declining profitability and market share, the company found itself burdened by operating in high-cost regions, leading to staff and product expenses up to 20% higher than industry competitors.
Additionally, their organizational complexity and product offerings were misaligned with consumer desires, resulting in unnecessary costs.
Recognizing the urgency, the CEO initiated a comprehensive cost-reduction transformation to enhance agility and market competitiveness.
The Strategy
The company partnered with experts to pinpoint the cost gaps and execute a holistic transformation strategy focused on reducing SG&A and product costs.
The transformation comprised four key components:
1. Rapid Diagnostic for Opportunity Identification
A swift, six-week diagnostic was conducted to benchmark costs across all facets of the business.
This involved an in-depth analysis of the product portfolio and value chain, scrutinizing supplier networks and manufacturing processes on a factory-by-factory basis.
The diagnostic revealed a roadmap for transformation, highlighting priority areas for cost reduction and setting targeted savings goals with clear timelines.
2. Overhead Reduction and Procurement Optimization
In the short term, the company restructured its organization to enhance accountability, reduce complexity, and streamline decisions.
A focused effort on procurement included introducing new suppliers from low-cost countries and renegotiating existing contracts.
This competitive approach aimed at reducing sourcing costs by 8%–10%, with even greater savings in categories like plastic and electrical components.
3. Product Redesign for Value
By mapping product cost drivers, the company identified opportunities to redesign products without compromising quality.
Through this design-to-value process, they eliminated features no longer valued by consumers and leveraged GenAI-powered tools to support data-driven cost-saving claims during supplier negotiations.
4. Transformation Management Office (TMO) Oversight
A TMO was established to oversee the transformation process, ensuring alignment with timelines and milestones, coordinating cross-functional performance, and maintaining governance to prevent cost backsliding.
This office acted as the control tower, ensuring disciplined execution and sustainable impact.
The Outcome
This transformative approach has saved the company over $100 million in cost savings.
The transformation is underpinned by a robust execution plan focused on change management, governance, and transparency to ensure long-term sustainability.
This initiative not only streamlined operations but also reinforced the company's competitive edge, demonstrating the power of strategic cost management.
For CEOs facing similar challenges, this case underscores the importance of a comprehensive, data-driven approach to cost transformation.
By addressing the root causes of inefficiencies and aligning organizational structures with market demands, companies can achieve significant savings and enhance their market positioning.
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