Cost Reduction & Program Management

Cost Reduction & Program Management

Ricardo Strategic Consulting (RSC) delivers over $150 million (12%) in cumulative cost savings for a global automotive company.

Challenge

The macro-economic environment suggests automotive growth may plateau over the next 1-3 years. OEMs and tier 1 suppliers are compelled to drive investments into emerging themes of electrification, connected and autonomous vehicle technology and shared mobility. Wall Street reacts well to companies showing growth with visionary strategies for a new age of advanced mobility.

A global automotive company’s purchasing organization is tasked with a stretch goal to double cost reduction savings to 12%-of-spend to unlock cash for transformational investment. Siloed thinking has taken hold in the organization as the unintended consequence of the company’s historical practice of dividing cost reduction targets among different departments and this has left large savings opportunities overlooked. RSC engages as a single owner to identify, accelerate, and implement systemic organization-wide efforts to reduce cost and achieve the aggressive new cost reduction goal.

Approach

RSC utilizes holistic cost reduction levers and engages the company’s cross-functional stakeholders to find opportunities and provide appropriate urgency. Savings opportunities are prioritized and developed with work plans, cost reduction targets, crossfunctional implications, potential risks, and timeline necessary for implementation. A steering committee meets regularly to ensure all cross-functional stakeholder voices are heard, risks are mitigated, and optimized solutions are actively pursued. RSC undertakes full ownership pushing an accelerated path for organization-wide cost reduction.

  • Design-led Cost Optimization: Review value trade-off between component features, performance, and cost drivers

  • Strategic Sourcing: Assess supply base and entire sourced parts list, conduct targeted market tests to map out an optimized global supply base footprint

  • Parts Proliferation Management: Review component drawings, part functionality commonization opportunities and obsoletion pathways

  • Manufacturing Operations Improvement: Investigate labor and overhead costs, scrap rates, inventory reduction, and manufacturing equipment utilization

  • Logistics and Value Stream Mapping: Map-out raw material sources, parts manufacturing, supplier tier value chain, and delivery routes to find efficiencies​

Savings can be further enhanced by raw material bulk buy programs, packaging optimization, warranty reduction, and high-value problem resolution efforts where applicable.

Recommendations

RSC works hand-in-hand with client leadership and working-level stakeholders. We take full ownership of the cost reduction cycle from idea generation to final implementation. A joint steering committee with the client’s leadership and key stakeholders conducts regular reviews, provides oversight and eliminates roadblocks.

Results

RSC delivers over $150M (12%) in cumulative cost savings.

Client earmarks future annual cost reduction target assigned to RSC-led cost reduction activities.

RSC develops a playbook for client leadership and coaches client working team to perform company-wide cost reduction as part of day-to-day activities.

Client transitions from cost reduction approach to a cost avoidance approach by ‘doing it right the first time.’

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