Why Cost Transformation Matters in 2023?
Cost transformation is more than just about cutting costs: managing costs effectively and ensuring they align with the organisation’s strategy and main initiatives. It’s about changing behaviours, practical and logical planning, and putting in place a framework to achieve sustainable cost competitiveness.
At a time when businesses find themselves having to pull the corporate purse strings much tighter, you might be considering hiring a cost transformation service and seeing what the procurement experts can help you accomplish. Below is a look at why cost transformation matters in 2023.
Cost transformation helps to meet stakeholders’ demands for more value
External events such as COVID-19 and high inflation have placed immense financial pressures on businesses, and these have drawn more attention to costs. Cost transformation programmes provide the organisation with opportunities to review past performance and detect any areas of the business that are costing the organisation more than they should.
Stakeholders know that it’s possible to deliver rapid, major change. COVID-19 clarified this and created more pressure to increase cost reduction. Although cost reduction is important, stakeholders demand more than mere cost reduction. They’re demanding a more strategic approach to cost transformation.
Cost transformation helps you to attain more value from suppliers and the market.
Naturally, cost transformation involves taking a hard look at your suppliers and contracts’ specifications to understand whether there is any flexibility, your key requirements, and how you can cut costs without sacrificing efficiency or quality. It also involves considering alternative suppliers.
A good category plan will help you reap more value from markets for specific categories as part of a cost transformation project. The plan should consider the market’s present circumstances, clarify your internal demand and requirements, and determine how to achieve value from the relevant market.
Cost transformation helps you build a sustainable cost-reduction culture and encourage behavioural change.
When it comes to reducing costs, companies that succeed at doing this are the ones that make cost-reduction measures stick. They don’t issue long, official letters from the management about cost cutting. They don’t urge employees to follow cost-cutting measures. Instead, they make an extensive effort to embed the culture of cost reduction within the organisation. A new consciousness around cost-cutting and a culture of cost reduction develops throughout the company. Keeping costs low becomes a major company objective, crucial to consistently delivering cost savings each year.
Cost transformation can improve decision-making and long-term business planning.
Cost transformation projects help businesses to develop an understanding of markets and of the internal and external factors that impact their cost base. Organisational structure, changes such as mergers or acquisitions, and technological changes can all affect costs. Understanding your costs and how different factors influence them can lead to sound and more solid decision-making, and this knowledge can help lay the foundations for better long-term business planning.
If you’re struggling to cut costs and want to do so not just in the short term but also as part of a longer-term business strategy, contact us. We approach cost transformation by looking at your spending and assessing spending opportunities, ways to reduce costs, and how you manage categories and transactions. We’ll overhaul your cost management and leave you with the reins to continue with the new systems in place.