Cost Optimization Strategies Coming Out of COVID-19
May 21, 2020
Due to COVID-19 and the shelter-in-place policies, organizations are implementing remote work where possible, but for some, it’s not sustainable. The common reaction to the economic downturn tends to be reducing costs across the board. However, cutting costs without clear segmentation during an economic downtown is not the recipe for success. Cost adjustments do need to be made, but the goal should be to strike the right balance between targeted, sustainable and smart spending to fuel your organization for growth. Initiate cost adjustments to streamline and simplify business operations. Concentrate your spending on areas of the business that drives the greatest value and differentiation.
Think of your organization as a living organism. You can trim the extra fat, but if you cut away at the essential parts of the business, performance will start to drop off. Having to make cost adjustments is not easy, but it may be necessary for your business to survive and thrive amidst and post-COVID-19.
Here are a few tips on how to reduce spending and strategies on cost optimization.
- Look for opportunities to negotiate discounts. In uncertain times, your vendors are more likely to be flexible on pricing. Reaching out in advance to have discussions about payment plans and pricing can help reduce costs in the short term.
- Spending should be hyper-focused on products and services in highest demand and those driving the most profit. Also, keep in mind, the key customers representing the greatest share of your revenue.
- Unlock operational efficiencies by streamlining processes and reconfiguring supply chains. Resource utilization, production, distribution and inventory management are all aspects of operational efficiencies that can be adjusted during this time. Remember that the first step to operational efficiency starts with the identification and restructuring of organizational inefficiencies.
- Reduce IT infrastructure costs by retiring unsupported applications and consolidating redundant functionalities. Finding a platform that offers more than one service can decrease spending and unify processes.
- Leverage technology to automate certain types of work processes to reduce labor costs. The ability to automate workflows that run across numerous platforms to decrease manual, repetitive tasks is valuable in every industry.
- Renew focus on quality, not just in products and services, but also in information and data. Look for platforms that offer unique attributes to benefit long-term goals as well as day-to-day business functions.
As the world continues to combat COVID-19, having cost optimization strategies for navigating remediation is essential. For more information, please read BDO’s Resilience Playbook
for guidance and solutions for re-entrance into the workplace.