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How can companies improve their profits and increase their competitiveness by reducing costs?

By Richard Coughlin and Peter Sirman, PA human resources experts.

Many companies have taken rapid and sometimes significant cost cutting action to help survive the worst of the recession. However, the forthcoming period of potential recovery may still feel like a recession and is likely to remain just as tough.

Half dead, half alive zombie consumers depressing demand. Zombie banks and governments are unable to lend or stimulate demand, and low cost economies are creating strong competitors and constraining future price rises.

Each sector will be impacted differently but many companies in the UK and across Europe will now need to formulate a plan to remain competitive and rebuild their profit without raising prices or relying on significantly increasing revenues.

This will call for a new wave of cost management - not to find short term fixes and cost cutting but to uncover a wholly more efficient and low cost way of delivering value to customers.

Companies that achieve this can create a platform for a higher level of performance to take them through the immediate economic constraints and give them a platform for short term growth through increasing market share and long term growth as demand rises in the future.

There are three key steps that companies can follow:

Refocusing on what the customers really value: by re-examining the goods, services and propositions that are offered. Through checking how existing goods and services meet changing customer requirements there is the opportunity to re-designing those offerings so that they cost less to produce and deliver

Changing the operating model: by looking at new, lower cost operating and delivery models. This can be achieved by considering channels to market, new distribution and production partners, and new internal operating model, which focus on the goods and services you know your customers want

Driving ruthless internal efficiency: by stopping any activity that does not add value: companies should uncover inefficient end to end delivery processes right across the supply chain; drive out waste and the cost of failure, maximise the use of the capacity of all resources; and seek new value by exploring sourcing options for services and components.

To find out more about rebuilding business performance through effective cost management, please contact us now.