Cost Reduction

We use the principles of Activity Based Costing (ABC) to deliver our cost modeling projects to meet the specific needs of each of our clients. Most commonly, we support our clients in two areas:

1. Cost-to-Serve: Assessing profitability at the client level, to support Go-to-Market and Commercial Policy decisions.

2. ABC Modeling: Used to negotiate contract fees, assess performance at product level, and identify possible mix optimizations.

In both cases, we work with you to deliver:

A. Financial Simulator: Generating detailed P&Ls through a cube of channel, client, region, category and product angles or with specific views reflecting your needs.

B. Profitability Analysis: Providing you with important insights from a granular view of performance and identifying opportunities to support decision-making.

C. Assumption Book: Detailing how the simulator was built, with the main assumptions (allocation criteria) to keep the process alive internally after our project is finished, and support future waves.

D. ‘What-if Scenario’ Simulation: Builing into the tools so the company can analyze the impact of the proposed solutions.

Our Methodology

We apply a proven methodology and our pragmatic learnings to your reality.

We are convinced that our clients know their business better than anyone else. At the same time, we provide outside experience, proven methodologies, and cross-industry benchmarks that can support our clients in developing these Cost Modeling assessments with speed and accuracy.

To build up a cost modeling tool, we take a step-by-step approach that ensures we (i) understand you and your business and (ii) develop a tailored solution grounded in reality – applying a pearl of pragmatic wisdom to discuss cost allocation, splits, and trade-offs and (iii) ensure a detailed hand over for the company to keep the model alive and support future cost modeling improvements. This typically translates into 6 project phases:

1. Baseline: To set up a more granular view of cost modeling, we work alongside the different departments to define the adequate cost breakdown in a ‘bottom-up’ approach, considering the unique client model and challenges to be addressed.

2. Design of the Model: We define with our client’s team the allocation criteria of each cost pool per product or client, ensuring to reflect business reality while reconciling management and accounting information.

3. Allocation of Costs: we build the tool according to the model designed (for Cost-to-Serve, a new P&L format is created to isolate the most relevant costs).