The Sustainability of Cost Reduction Processes
The importance of overhead costs reduction processes is highlighted by the majority of firms. More than 83% of all companies that filled out the survey confirmed to have undertaken an overhead costs reduction process throughout the last three years.
Energy most important cost category. Regarding the different types of overhead costs, energy is by far the most important type. 43% of all participants name energy as one of the three most important types of costs. Other important cost categories are marketing, logistics, freight and travel management.
Savings are used to increase profit margins –less than half of the companies reinvest the savings. In that perspective the studies shows that sustainable companies more often tend to reinvest the money in the development of new markets and already existing markets than others.
Cost reduction processes start as result of not reaching financial goals. Mostly companies started a cost reduction process in their overhead spending as they failed in reaching their desired profit margins, made losses or were not competitive enough compared to their competitors. However, sustainable companies have a more active treatment of their overhead costs and start programmes proactively not because of external pushes.
Most companies still use standard cost controlling methods for their overhead costs management. Less than half of the companies acknowledge the application of methods for comparison. An active comparison of costs via the use of purchasing price analyses or the application of benchmarking with competitors is only done by 43.5 % and 42.5%.
Furthermore, employees seem to be of high importance when initiating and implementing a cost reduction process. Companies should be aware of the risk they take when not actively involving their staff in such a process. Especially the most sustainable companies acknowledge to involve and inform their employees.
Energy most important cost category. Regarding the different types of overhead costs, energy is by far the most important type. 43% of all participants name energy as one of the three most important types of costs. Other important cost categories are marketing, logistics, freight and travel management.
Savings are used to increase profit margins –less than half of the companies reinvest the savings. In that perspective the studies shows that sustainable companies more often tend to reinvest the money in the development of new markets and already existing markets than others.
Cost reduction processes start as result of not reaching financial goals. Mostly companies started a cost reduction process in their overhead spending as they failed in reaching their desired profit margins, made losses or were not competitive enough compared to their competitors. However, sustainable companies have a more active treatment of their overhead costs and start programmes proactively not because of external pushes.
Most companies still use standard cost controlling methods for their overhead costs management. Less than half of the companies acknowledge the application of methods for comparison. An active comparison of costs via the use of purchasing price analyses or the application of benchmarking with competitors is only done by 43.5 % and 42.5%.
Furthermore, employees seem to be of high importance when initiating and implementing a cost reduction process. Companies should be aware of the risk they take when not actively involving their staff in such a process. Especially the most sustainable companies acknowledge to involve and inform their employees.
Suositeltavat Julkaisut
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Cost Savings Today - 3/2011 |
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The Sustainability of Cost Reduction Processes Overhead Cost Reduction Processes are Important to European Companies |
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Cost Savings Today 2/2012 The importance of purchasing is increasing |
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