The lockdown caused a fall in demand across a wide range of sectors. Many companies have had to rebalance their income and expenses. They are focussing on cost reduction. ‘That’s not an easy task,’ says Philip Van Gasse, partner at valueXstream. ‘Often, the list of costs that can actually be cut is pretty short. Deciding what and how much you need to cut is a job for the experts.’
As a manager, you have to push the right buttons at the right time. The buttons of your cost structure, for instance. This is particularly important in times of economic uncertainty. If you adjust your cost structure on time, you can limit potential damage. Or increase your chances of survival. Good cost management ensures that the level of costs is geared to the amount and evolution of turnover. That way, you increase liquidity and return.
An example? ‘In the event of falling sales figures, you have to keep the actual cost price of your service under control,’ Philip explains. ‘During the lockdown, there was a drop in the number of orders, and consequently, the volume per transport. The result: your profit margin shrinks. So, how do you reorganise transport? Do you extend your delivery times and if so, by how much? What minimum stock levels should you maintain for raw materials, semi-manufactured products and end products? From which quantities do you start to reduce production runs to a lower capacity?
Finding the breakeven point requires specific experience and skills. You have to make cuts in the right places, at the right time, just enough and without damaging the healthy parts of your organisation. Often, you have to strike a happy medium. In addition, many companies are looking for new earnings models. This is when an insight into costs helps you make the right decisions.
Inaction isn’t an option
‘Sitting back and hoping for better times, without taking action, isn’t an option,’ Philip concludes. ‘Unfortunately, the right expertise isn’t always available. That’s why valueXstream supports managers in a variety of ways. We examine your cost structure and make it transparent. This enables you to continuously monitor costs and make adjustments where needed. Do you lack the expertise or manpower to implement our recommendations? Simply call in a valueXstream expert, for as long as you need to, full-time or part-time. Your wish is our command.’