Cost management is a straightforward process consisting of reviewing a businesses’ running costs, encompassing everything from energy to communication bills down to the cost of your pens. These costs, under this process, are reviewed to ensure they are, at the time of analysis, the cheapest option available for the organisation. Whilst this may sound like an ideal way to manage business costs, it is, in fact, riddled with flaws.

What elevates strategic cost management above this process is that this type of review is aligned with the businesses’ visions for the future, taking in all the factors to make the most strategic choice, rather than looking at cost savings alone. Time and time again, strategic cost management provides more substantial successes in cost saving, business efficiency and productivity rates over a long-term period, making it a much more viable option than the counterpart short-term solutions that cost-focused strategies provide.

For example, a business may be looking to change its energy provider. It would be easy for the organisation to make a cost comparison of the market to find the cheapest and most attractive energy deal based solely on its price-tag. Yet, this deal may not be in line with the future goals of the organisation, which may be looking to decrease their carbon footprint to follow global trends; often because renewable (green) energy can cost a little more than its alternatives. Essentially, the decision cannot be made on cost alone for the business to reach its goal; it has to encompass everything about the organisation, from its goals and growth expectations to current business model, to ensure the supplier meets the demands of the business and works effectively in their cost reduction strategies.

We view strategic cost management as such:

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It is, therefore, important businesses understand the fundamental differences between cost management and strategic cost management, as focusing primarily on cost savings could see their business unable to achieve their targets. In today’s competitive business landscape, organisations must view their spend (both direct and indirect) as investments, where smart investment decisions work not only to manage costs but toward a strategic vision, addressing external pressures and delivering real value to the business other than cost savings. In some cases, businesses may find that their entire model needs to change in order for the organisation to remain competitive in the evolving marketplace and for strategic cost management to work as effectively as possible.

As global competition, regulation updates and consumer demands put pressure on company budgets, businesses who have not altered their approach to cost control from the old-fashioned, cost-focused decisions to strategic choices – where business costs are optimised in the context of the business model as a whole – may experience considerable bumps in their journey, especially in times of uncertainty.

Strategies implemented need to be carefully navigated to offer the best competitive advantage, appropriate package deal and eliminate any worries derived from implementing big changes into the business; therefore, businesses may find they benefit from expert consultation by specialists that boast years of experience, and established networks, in the industry. As there is no “one-size-fits-all” solution when it comes to the strategic cost management needs of a business, our experts will work with you and your managers to understand your business needs and visions for the future so that they can not only offer you the best supplier options, but demonstrate (and continue to show you in analysis reports) why these options work for you. We market our extensive networks to secure you competitive deals you won’t see anywhere else; and as an independent service, we are not subject to the status-quo which ensures you receive the solutions that are most appropriate to your business.

Our strategic cost management is solely driven by your business needs, providing you with options you may have not even necessarily known about or considered before. For your no-obligation consultation, get in touch with our team today to find out more about how we can help you streamline your costs and steer your business in the right direction!

Article by: David Rickard