In tough retail trading conditions, managing the costs of the business increases in priority, in order to deliver the bottom line profit numbers. So, cost cutting, reducing costs and cost saving programmes represents a major opportunity for your business – in both the short and long term. So, in this podcast episode, Oliver Banks shares his operational cost savings framework as well as a series of lessons to help you make the most of your retail cost savings programme.
Listen to this podcast episode of the Retail Transformation Show to discover:
- Oliver Banks’s 5 part operational cost saving framework
- The 8 lessons learned
- If cost saving is a transformational change or not
If you’re looking to get in touch with Oliver, you can email on email@example.com.
Operational Cost Savings Framework
In the podcast episode, Oliver Banks lays out a 5 part framework to help guide you through operational cost savings.
The 5 parts of the operational cost saving framework are:
“Reviewing and critically assessing if your business is operating effectively”
The first stage is about reviewing your operation and critically assessing if it’s doing what you’re expecting it to do. Ask:
- Is the operating model working as you expect it to?
- Have the business requirements or rules changed? (Especially important given the recent shifts that we’ve seen with Covid-19)
- Are people performing and working at the right rate? (And if not, why not?)
- Are people working at the right level?
- Are tasks being done at a sensible time?
By asking these questions and assessing your operation, you may discover actual cost reduction opportunities without making any real changes. Just getting back to the standard operating model.
These tend to be the simplest and quickest changes to make.
“Stopping elements with immediate and non-consequential effect”
Next, you’ll want to be looking for things that you can just say “stop” to. Unprofitable or unpopular propositions. Irrelevant and non-value add process steps.
These are pretty fast to make them happen – but you must be careful of a couple of things.
Firstly, be aware of any HR and/or legislative requirements that you need to fulfil. Secondly, make sure there are no consequences for just stopping. Invisible unintended consequences can cause a lot of pain here. Are there replacement parts to allow the “machine” to continue to run? Was there a small but quantifiable and noticeable effect on sales or other performance metrics? Is there a halo effect to consider?
“Finding ways to turn down the dials and get the same output with less input”
In this part, you must find parts of the business that you can do less of or increase the throughput. Essentially, this stage is about getting more for less.
Perhaps you could reduce the frequency of a particular activity. Perhaps there is a chance to improve productivity or efficiency and reduce the overall time or cost of a part of the business or operation. Maybe you could combine elements to reduce downtime and travel time.
Discover more about how you can reduce waste and listen to the podcast episode 6: Finding Waste In Your Retail Operation.
“Removing one part of the business and replacing it with an alternative way of achieving the same result”
Next, look at reengineering processes or parts of the operation. Remove one section and replace it with another (of course at a lower cost if cost saving is an objective).
For example, perhaps you remove a paper process and replace it with a new digitally enabled process. Alternatively, maybe you remove a function from your business and partner with an outsourced supplier to provide that as a service.
The watch-out here is to make sure that you optimise your operation before you digitalise or outsource it. There is no point in spending time and money in replacing rubbish with rubbish!
“More fundamental, structural change of the business or part of the business”
Finally, the 5th step is to reimagine the operating model or part of it. This is a more fundamental change. Or a reinvention as Joe Jackman would call it (check out his appearance on episode 87 and episode 88 where he was exploring the Reinventionist Mindset.
This is not so much a cost saving opportunity but rather a new way of operating which ideally will come in at a lower cost or higher profitability. It will require more radical thinking. More expansive thinking. And even thinking more broadly than your original scope to ensure that you’re maximising the potential.
Of the different parts of the framework, this final stage is the hardest and slowest. But, it could come with the greatest opportunity too.
8 cost saving lessons
There were also 8 lessons shared to help guide you. Check out the full episode to explore these, but as a reminder, these were:
- Look macro, then micro – considering the big picture then zooming into the detail.
- It’s extremely unlikely that you’ll find a single “silver bullet” – but rather look for a collection of ideas.
- Look at opportunities both within and across functions.
- Revisit ideas that have previously been rejected by the business. Perhaps they’ll be more palatable now.
- Plan for more savings than your current cost saving gap or target. When projects fall by the wayside or come in with less benefit, you’ll still be on target.
- The longer your business has been looking at cost savings, the more likely it is that the obvious changes will have been made. You’ll need to step up to find the “high hanging fruit”
- Beware of unintended consequences
- Use cost savings to buy time and resources to transform the business and further improve the trajectory of the business. Don’t rest on your laurels.
Setting your cost savings programme up for success
It’s essential to manage a cost saving programme with diligence. In fact, it’s relatively easy to come up with ideas – but delivering them is a different (but hugely important) matter. So, if you need your cost saving programme to deliver, make sure that you put in place effective programme management.
I, Oliver Banks, and OB&Co would be delighted to help you make a success of your cost reduction vision and programme and get your business fit for the future.
Connect on LinkedIn or reach out by email on firstname.lastname@example.org
Listen to other podcast episodes
If you enjoyed this episode, now listen to these podcast episodes of the Retail Transformation Show:
To hear how you can eliminate waste, listen to episode 6: Finding Waste In Your Retail Operation
Or to choose your change programme, take a listen to episode 53: The Retail Transformation Menu