Facing growing online competition and pressured margins, many retail and consumer goods companies are looking for ways to cut costs. Experts at Oliver Wyman outline how operating costs can be kept under control, both during the current Covid-19 crisis as well as in the post-pandemic era.

An overview of measures that can reduce costs in the post-Covid-19 recovery stage:

Operations and supply chain

  • Redefine required business complexity (e.g. product range)
  • Systematic redesign of digital E2E collaboration and data sharing
  • Re-balancing of flexibility and cost (manufacturing, supply, etc.)
  • Labor schedule flexibility (advance notice, shifts, etc.)
  • Rebalance transportation schedules (frequency, sizes)
  • Next generation forecasting/ S&OP optimization
  • Retain cross-site connectivity and global best practice sharing

Overhead functions

  • Use Covid-19 time as reference for service levels, reports, meetings, and systematically challenge the need to go back
  • Link business changes to effort drivers and respective resource sizing (e.g. less promo activity)
  • Define new normal for remote/ digital services instead of physical check-in (IT, HR, etc.)
  • Define future workspace need in light of permanent WFH percentages, potentially even question HQ structure entirely

Indirect spend

  • Retain elements of tighter spend controlling and cash management
  • Optimize procurement operating model for spend control, risk management, crisis sourcing
  • Redesign future event and travel requirements (zero-based budgeting, literally)
  • Systematically review make-or-buy decisions by category, based on crisis experience
  • Streamline and optimize payment terms across the supplier base
  • Renegotiate lease agreements

An overview of measures that can structurally cut costs beyond Covid-19’s impact:

Operations and supply chain

Manufacturing

Savings potential: 10-15%

How? Lean processes, plant network redesign, automation

  • Shop floor operations
  • Capacity
  • Site network/footprint

Logistics

Savings potential: 5-10%

How? Lean processes, DC network redesign, S&OP/ forecast improvement

  • Warehousing
  • Distribution
  • Inventory

Store operations

Savings potential: 10-20%

How? Process redesign, digitization and automation, optimized labor scheduling

  • Store labor
  • Store fittings
  • Store support functions

Overhead functions

Business functions

Savings potential: 15-20%

How? Reorganization, refocus on strategic minimum, digitization

  • R&D
  • Buying/trading
  • Manufacturing
  • Marketing & Sales

Support functions

Savings potential: 20-25%

How? Service level redesign, flexible/agile business model, shared services

  • HR
  • IT
  • Finance
  • Indirect sourcing

Indirect spend

OPEX

Savings potential: 10-20%

How? Systematically “cheaper, better, less”, tight spend control

  • Marketing
  • Facility management
  • Transportation
  • HR services

CAPEX

Savings potential: 15-20%

How? Systematically “cheaper, better, less”, tight spend control

  • Machines
  • Warehouse and store equipment
  • Fleet

Real estate

Savings potential: 2-5%

How? Consolidation/ re-location, systematic renegotiation, indexation

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