Cost reduction

Solution area 2: Cost reduction

Achieve maximum profitability and minimize waste through strategic and hands-on cost-reduction techniques. This approach focuses on managing expenses that create a significant impact, thereby identifying and eliminating unnecessary spending to increase efficiency and drive financial success.

- At LiB Consulting, we not only provide guidance on improving cost reduction but also assist in implementing these strategies at the operational level, ensuring effective and tangible results.

Why company initiatives fail to reach their maximum potential:

If your organization is facing these challenges, you may have overlooked opportunities to further reduce costs.

Repetitive Expenditure with the Same Suppliers: You consistently purchase the same products from the same suppliers without regularly assessing whether the current prices are genuinely competitive in the market.
Limited Negotiation Success with Suppliers: Your negotiations with suppliers result in minimal discounts of no more than 5% or, worse, no discounts at all. Additionally, the reasons provided by suppliers may seem vague or unsubstantiated.
Temporary Cost Reductions: You achieve cost reductions that are not sustainable over time, leading to a rebound effect where costs increase again after a certain period.
Limited Time for Continuous Improvement Projects: You do not dedicate sufficient time to ongoing improvement projects due to existing work commitments.
Inefficient Project Management: Your inefficient management of projects may lead to delays, inadequate problem resolution, and a failure to achieve desired outcomes.

Capabilities for Cost Reduction

Capability 1: Indirect procurement cost reduction

LiB’s cost reduction strategy aims to minimize expenses associated with the procurement of goods and services, excluding unnecessary or excessively high employee wages. Our focus lies in implementing practical measures to achieve tangible cost reductions, ultimately benefiting the company’s financial performance.

Capability 2: Logistics optimization

Through meticulous data analysis and route optimization, LiB excels in logistic optimization, which leads to intelligent route planning and enhanced supply chain efficiency.

Capability 3: Energy consumption management
Capability 4: Telecommunication cost reduction
Capability 5: Maintenance cost reduction

Case Studies: Successful Cost Reduction Strategies

Case: Consumable waste is often an overlooked cost in many companies

Industry:

Food manufacturing

Issues:

When a company faces challenges arising from an increasingly volatile economic environment coupled with the entry of foreign competitors, it becomes difficult to control costs. This, in turn, hinders the business from achieving its planned growth targets. Therefore, immediate cost reduction measures are essential to swiftly adjust the organization’s profit structure for sustainable competitiveness.

Key Results of Cost Reduction

Within just three months of LiB’s involvement, the company achieved a remarkable cost reduction of over 30%, resulting in savings of 4.2 million baht.

This company operates a large-scale food processing business, which has been experiencing slower growth than anticipated due to higher costs in comparison to its competitors.

Recognizing the immediate need to reduce costs, the company enlisted LiB to explore new strategies for sustainable cost reduction and quick wins.

In this project, LiB followed three main steps:

LiB conducted a comprehensive analysis of all company expenses to identify items with a high impact and potential for quick wins. The analysis revealed that a significant opportunity for a quick cost reduction lay in reducing material waste.
LiB then meticulously analyzed expenses in terms of quantity and price to prioritize and determine appropriate strategies for cost reduction for each item.
The most crucial phase of the project involved implementing cost-reduction measures. This included preparing evidence for price negotiation, such as analyzing supplier cost structures to assess the fairness of current prices.

For instance, in the case of a supplier selling rubber gloves, which experienced significant price increases during the COVID-19 pandemic, a proportional reduction was necessary when the rubber prices stabilized.

This required thorough preparation and negotiation strategies to achieve the desired price reduction.
By implementing measures to reduce wasteful material expenses, the company has successfully achieved a remarkable reduction of over 30% in excess costs within the high-impact target group. This translates to an impressive annual savings of up to 4.2 million baht, all accomplished within merely three months. In addition to the reduced costs, LiB has made significant contributions by designing tools to monitor abnormal expenditure patterns that may arise in the future. This proactive approach aims to prevent the previously reduced costs from escalating again in the future.