A well-structured cost reduction program starts with setting a target. Having a target is important to define the ambition up-front, establish early momentum, and provide a basis to track to success of the program. We then identify cost opportunities.

Each cost opportunity can be thought of as a stand-alone initiative targeting a specific cost area. During the identification stage, as many possible cost opportunities as possible are identified. These are then prioritised based on expected impact and riskiness / time to deliver, to arrive at a list of cost reduction initiatives to take forward as part of the program.

During the design cost initiatives stage, the list of prioritised cost opportunities are converted into actionable plans, with defined milestones, resources, and key financial and operational metrics. In parallel with working up individual plans for each initiatives, those cost opportunities that offer the most potential for delivering early savings should be fast-tracked for immediate implementation. This builds early momentum for the overall program, and in some cases can effectively fund the remainder of the program from the cashflow benefits of these quick win initiatives.

The deliver cost initiatives stage is about tracking the ongoing delivery of the initiatives, as well as tracking the actual financial benefits delivered from each initiative. It is inevitable during a complex cost reduction program that some cost initiatives will either be delayed or fail to deliver the anticipated benefits. Having the necessary tracking processes in place ensures that these variances are identified sufficiently early for additional mitigating measures to be implemented.