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Effectively Controlling Your Business’s Costs? 5 Frameworks on Cost Management

Managing and reducing costs is a critical for any organization’s survival. It’s a prerequisite for staying competitive.

levers of profitability

Below are 5 frameworks used by management consulting firms specializing in Cost Management. They cover initiatives that range from department-specific to enterprise-wide.

Cost Reduction Opportunities (across Value Chain)
https://flevy.com/browse/business-document/cost-reduction-204
This document identifies 45 cost reduction initiatives across the Michael Porter Value Chain, categorized into enterprise-wide, assess management, and function specific (e.g. Finance, Operations, Sales & Marketing, IT, HR, etc.).

Cost Reduction Primer
https://flevy.com/browse/business-document/cost-reduction-primer-650
Spend reduction can lead to significant cost savings typically in the range of 10-25%. It usually identifies a mix of short and longer term cost reduction opportunities. The objective of this document is to describe and provide guidance around the approach and practices applied on spend reduction engagements.

Cost Reduction Methodologies
https://flevy.com/browse/business-document/cost-reduction-93
This document discusses various cost reduction methodologies and concepts, including the following: Process Optimization, Strategic Sourcing, Shared Services, Business Process Outsourcing.

Enterprise Cost Reduction (ECR) Approach
https://flevy.com/browse/business-document/enterprise-cost-reduction-approach-704
Often, an organization must identify and size potential saving opportunities within controllable expenses. To ensure that these savings can be realized and sustained, a holistic approach to tackling controllable expenses is required — this document presents such a holistic approach.

Reducing the Cost of Quality
https://flevy.com/browse/business-document/Cost-Reduction-through-Quality-Improvement-150
This training fits well into any improvement initiative, including TQM and Lean management. The Cost of Quality (COQ) methodology instills a practical approach to quantifying the financial impact of the Cost Of Non-Conformance (CONC) and the Cost Of Conformance (COC).

The authors above have created documents that cover topics beyond operational improvement. Check out these their documents here:

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