The pressing problem for this major European vehicle manufacturer was that its cost base was far too high. As such, it was particularly susceptible to falling sales as the recession hit.
A radical cost reduction programme was devised by one of Novo Altum’s consultants, improving performance through streamlining the company’s processes in a number of ways.
The results spoke for themselves, with a £20 million cost saving being achieved – or 10% of the client’s cost base.
The vehicle manufacturer in question had a volume-based business model. Its high cost base meant that profit margins were tightly squeezed when sales volumes fell as the credit crunch bit and recession subsequently took hold. Our consultant recognised that if it was to weather the storm, it had to reduce its breakeven point.
This meant cutting back all process costs, other than the actual hands-on car-building costs themselves. Everything else from engineering and design, to back office support including finance, HR and IT had to be made more cost-effective.
The consultant conducted a detailed examination of the business’ operations, leading the client through a major programme of process identification, benchmarking and input and output cost analysis.
He then devised a cost reduction programme focusing on three main areas: eliminating redundant processes; introducing shared services for core processes; and outsourcing.
In addition, detailed efficiency improvements were identified in the design of the company’s support processes for the future.
Our consultant’s strategy meant that the company was now in a position to reduce its output costs by £20 million, from an original cost base of £200 million – a saving of 10%. Processes were streamlined and headcount was reduced, but the client was able to maintain its network of 130 sites in over 100 countries.