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PowerPoint Diagram Pack
Product Innovation
Finance and Accounting Human Resources Information Technology Procurement Product Development
Primary activities
Logistics
Operations
Marketing / Sales
Service
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Contents
Overview - Levers to Profitability - Profitability Challenges - Cost Reduction Opportunities - Cost Reduction in the Face of Downturn Cost Reduction Opportunities - Across the Value Chain - Enterprise-wide Opportunities - Asset Management Opportunities - Function-specific Opportunities
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
Contents
Overview - Levers to Profitability - Profitability Challenges - Cost Reduction Opportunities - Cost Reduction in the Face of Downturn Cost Reduction Opportunities - Across the Value Chain - Enterprise-wide Opportunities - Asset Management Opportunities - Function-specific Opportunities
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
Though there are multiple levers to maximizing a firms profitability, costs are the most directly controllable by any firm
Overview Levers to Profitability
Possibility for strategic changes and significantly impact the bottom line Firms span of control:
Firms have direct control over their procurement and cost structure Efficiency and effectiveness improvements through new operating models provide sustainable mid-to-long term benefits
Cost challenge
Increasing material prices Overhead costs
Capital challenge
Profits
Revenue challenge
Declining or stagnating revenues
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The capital challenge during downturn is largely beyond control of the firm
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Profitability is being challenged by increased costs, stagnated revenue growth, and increased capital costs in todays economic climate
Overview Profitability Challenges
Evidence:
Rising energy, commodity and material prices directly increase firms costs Increased SG&A / overhead costs across sectors. Special challenge as they do not decline as volumes go down. Imported goods and material are more expensive due to low value of US Dollar against other major currencies
Cost challenge
Increasing material prices Overhead costs
Evidence:
Challenging to acquire new capital due to declined institutional loan issuance activity and IPO activity Cost of capital increased due to declining credit ratings, increasing credit risk and lack of liquidity
Capital challenge
Profits
Revenue challenge
Declining or stagnating revenues
Evidence:
Revenues stagnating or declining as consumers reduce spending and change consumption patterns* Declining up-stream industry revenues as companies cut costs and spending
You can preview the full PowerPoint document and Capacity reductions and layoffs download it at http://learnppt.com/powerpoint/ sectors result to lower across
volume and revenue
*Note: Changed consumption patterns may mean increased demand for low-end brands and some special products
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At each level of the income statement, there exists opportunities for a firm to make cost reduction improvements
Overview Cost Reduction Opportunities
= Capital Employed Net Sales Challenge: How to improve: Declining or stagnating revenues Invest in Sales & Marketing New products and range extensions COGS SG&A R&D Cost of Capital Increasing material prices and costs Overhead / SG&A costs across sectors High cost of capital Availability of capital Economic Value Added (EVA)
Value
Reduce spending Reduce working capital Efficiency and effectiveness improvement and THIS IS A PARTIAL PREVIEW fixed assets Improve capital structure across primary and supporting functions
Results:
Increased SG&A Mid to long term Reduced spending provides download it at of value added immediate http://learnppt.com/powerpoint/ effects and R&D costs increase Short to mid to long Efficiency and effectiveness term effect improvements provide sustainable midto-long term effect
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Get into position where you can capture opportunities created by the downturn: Acquire assets and companies at discount prices during the downturn Strategic R&D and marketing investments to create growth platform for the next upturn Retain and acquire talents
Failure to meet investors expectations Limited funds for R&D, marketing, operational development puts at risk the companys future Ultimately may lead to bankruptcy or take over
THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
Success or failure in cost reduction will determine tomorrows winners and losers.
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
Contents
Overview - Levers to Profitability - Profitability Challenges - Cost Reduction Opportunities - Cost Reduction in the Face of Downturn Cost Reduction Opportunities - Across the Value Chain - Enterprise-wide Opportunities - Asset Management Opportunities - Function-specific Opportunities
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
Support activities
Finance and Accounting Human Resources Information Technology Procurement Product Development
Asset management opportunities Improving fixed assets efficiency and decreasing net working capital Impact mainly capital efficiency
3
Primary activities
Logistics
Operations
Marketing / Sales
THIS IS A PARTIAL PREVIEW opportunities for the primary and support activities: Specific
Impact mainly Selling, General & Administrative costs
Service
You can preview the full PowerPoint documentofandSold (COGS) (SG&A) and Cost Goods Operational and transactional download it at http://learnppt.com/powerpoint/ in nature
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
Contents
Overview - Levers to Profitability - Profitability Challenges - Cost Reduction Opportunities - Cost Reduction in the Face of Downturn Cost Reduction Opportunities - Across the Value Chain - Enterprise-wide Opportunities - Asset Management Opportunities - Function-specific Opportunities
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
10
Shared Services provide immediate cost and efficiency benefits and opportunities for further service delivery improvement
Enterprise wide opportunity: Shared Service Centers
Benefits Reduction of Costs Example
Labor arbitrage through lower cost locations efficiency increase (up to 15% savings) Headcount reduction through increased performance and better controls effectiveness increase (up to 15% savings) Leverage of economies of scale and scope / consolidation (up to 10% savings) standardization (elimination of duplication, consistency, standard service portfolio) optimization (incl. continuous improvement, best practices) globalization specialization (mutual use, utilization) full leverage of technology
Potential
Shared Services as a often used beneficial delivery alternative for various support functions, esp. Finance and Accounting, HR, IT and Customer Care/Services
Setting up a SSC for the first time might reap up to 40% of savings Optimizing existing SSC might still deliver up to 20% of savings
Focus on select activities only competencies, skills service culture Implementation of strict performance management (SLAs, KPIs, etc.) transparency consistency
THIS IS A PARTIAL PREVIEW You can preview theCross-business leverage of resources document and full PowerPoint Increase in (no fiefdoms or pockets of staff) Flexibility and it at More direct staffing process download Value- http://learnppt.com/powerpoint/ (incl. temporary hiring)
Add
Legacy staff to work on value-adding activities Variabilization of costs
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11
Outsourcing provides operational cost savings, improves strategic flexibility & provides a foundation for industry best practices
Enterprise wide opportunity: Outsourcing
Outsourcing Example
Benefit from lower cost structure: Labor cost arbitrage in low cost locations Continuous process improvement Economies of scale Improve your strategic flexibility: Reduce capital employed by transferring fixed costs to variable costs Improve business scalability Advanced outsourcing partners can provide other value adding services: Business insight to drive top-line growth E.g. Use customer contact data to improve service experience and reduce churn
Potential
Consider outsourcing for processes that share the following characteristics: Routine, standard activity Does not require critical or strategic business knowledge Significant gap against best practice Requires IT systems implementation/upgrade High variability in load Rapid improvement needed Number of functions benefit from outsourcing: IT, Finance & Accounting, Customer Care, Assurance management, Knowledge processes (master data mgmt etc.)
You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
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Innovation in product re-design may yield considerable cost savings in manufacturing, transportation and procurement
Enterprise wide opportunity: Product Innovation
Product Re-design Example
Reuse of preferred components: Approved Supplier and Approved Vendor Lists (ASL/AVL) for components and materials Reuse decision supported by ratings around material cost, quality, availability and reliability Standardization of Designs: Modularization, using common parts and assemblies across many product lines Bill of Processes: Tying Mfg processes, assets and plant location to BOM to assist with minimizing engineering change requests Manufacturing capabilities are built into R&D/Engineering processes Re-design package to be lighter, smaller, more durable and easier to handle: E.g. Nokia has gained ~80 million dollars yearly savings from its smaller packages
Potential
80% of the product cost is determined during R&D and Engineering design cycles Cost reduction opportunities in direct material costs, manufacturing operations, logistics and transportation.
You can preview theimprovements require improvements in IT architecture: full PowerPoint document and Product design PLM - ERP - SCM system integrations for information exchanges download it at http://learnppt.com/powerpoint/ Point to point models or a SOA based Master Data Management Integrated IT architecture
(MDM)
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
13
END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only.
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Questions & feedback? Email me dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. 15