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Strategic cost-out requires clear principles

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PA business transformation expert, Stefan Knapp, has had a byline published in, highlighting the results of PA’s Cost-out Maturity research. According to the report, the automotive industry leads the way for cost-out maturity, having reduced production costs significantly in recent years. However, only a few other industries are on a par with automotive – despite potential savings of up to 30 per cent.

Stefan explains: “Cost-out is based on simplification and automation. Work processes and administrative procedures are simplified and made clearer, and simple work tasks are automated. However, rather than focusing on isolated processes, the entire organisation needs to understand what cost-out is and how to transform it into a fundamental part of the work mentality.”

re-engineering Cost-out

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Stefan refers to a number of principles that define a strong cost-out strategy: The vision needs to be clearly defined and transparent, the organisation needs to understand and be able to execute the strategy, and the tools need to be in place.

“The cost-out principles need not only to be followed but become a vital part of the entire company DNA, and this makes high demands for management to create a sense of ownership among the employees. The company must make sure it has the right competences to drive the cost-out agenda and make the principles an integrated part of the organisation,” Stefan concludes.

Stefan Knapp is a business transformation expert at PA Consulting Group

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