Deloitte recently conducted their first in a series of biennial surveys on cost improvement practices and trends within large firms in Europe. Their findings were extremely interesting.
Balance sheet management – traditionally associated with difficult times – emerged as a new key priority this year, alongside the top 3 strategic priorities of sales growth, product profitability and cost management. Predictably, in a post Brexit UK, cost management was the top strategic priority amongst UK respondents.
The survey also indicated that more than half (56%) of cost management projects fail to achieve their targets; that tallies with what we see. Left to work alone, companies often move onto other priorities and focus shifts. Only with the kind of careful ongoing management of suppliers our clients engage us for, do savings identified at the beginning of the project materialise.
The survey further revealed a lack of strategic cost management planning in Europe versus the rest of the world. Where the Europeans focus on tactical methods, such as purchasing compliance or process improvement, the previous surveys of US and Latin American markets revealed a more strategic transformational approach – and a higher success rate.
What’s particularly interesting about this from our perspective is that Deloitte surveyed businesses with a minimum €150 million turnover, where more sophisticated procurement operations are in place. About 75% of our client organisations turnover less than £100million, meaning the proportional opportunity in organisations that fit this lower turnover profile must be more significant still.
For UK respondents to the survey, cost management is the top priority, yet 56% of projects fail to meet targets due to poor implementation.