How retail and consumer goods companies can save costs
Facing growing online competition and pressured margins, many retail and consumer goods companies are looking for ways to cut costs. Experts at Oliver Wyman outline how operating costs can be kept under control, both during the current Covid-19 crisis as well as in the post-pandemic era.
An overview of measures that can reduce costs in the post-Covid-19 recovery stage:
Operations and supply chain
- Redefine required business complexity (e.g. product range)
- Systematic redesign of digital E2E collaboration and data sharing
- Re-balancing of flexibility and cost (manufacturing, supply, etc.)
- Labor schedule flexibility (advance notice, shifts, etc.)
- Rebalance transportation schedules (frequency, sizes)
- Next generation forecasting/ S&OP optimization
- Retain cross-site connectivity and global best practice sharing
Overhead functions
- Use Covid-19 time as reference for service levels, reports, meetings, and systematically challenge the need to go back
- Link business changes to effort drivers and respective resource sizing (e.g. less promo activity)
- Define new normal for remote/ digital services instead of physical check-in (IT, HR, etc.)
- Define future workspace need in light of permanent WFH percentages, potentially even question HQ structure entirely
Indirect spend
- Retain elements of tighter spend controlling and cash management
- Optimize procurement operating model for spend control, risk management, crisis sourcing
- Redesign future event and travel requirements (zero-based budgeting, literally)
- Systematically review make-or-buy decisions by category, based on crisis experience
- Streamline and optimize payment terms across the supplier base
- Renegotiate lease agreements
An overview of measures that can structurally cut costs beyond Covid-19’s impact:
Operations and supply chain
Manufacturing
Savings potential: 10-15%
How? Lean processes, plant network redesign, automation
- Shop floor operations
- Capacity
- Site network/footprint
Logistics
Savings potential: 5-10%
How? Lean processes, DC network redesign, S&OP/ forecast improvement
- Warehousing
- Distribution
- Inventory
Store operations
Savings potential: 10-20%
How? Process redesign, digitization and automation, optimized labor scheduling
- Store labor
- Store fittings
- Store support functions
Overhead functions
Business functions
Savings potential: 15-20%
How? Reorganization, refocus on strategic minimum, digitization
- R&D
- Buying/trading
- Manufacturing
- Marketing & Sales
Support functions
Savings potential: 20-25%
How? Service level redesign, flexible/agile business model, shared services
- HR
- IT
- Finance
- Indirect sourcing
Indirect spend
OPEX
Savings potential: 10-20%
How? Systematically “cheaper, better, less”, tight spend control
- Marketing
- Facility management
- Transportation
- HR services
CAPEX
Savings potential: 15-20%
How? Systematically “cheaper, better, less”, tight spend control
- Machines
- Warehouse and store equipment
- Fleet
Real estate
Savings potential: 2-5%
How? Consolidation/ re-location, systematic renegotiation, indexation
- Lease/rent
- Service fees
