Organizational Cost Savings
What is organizational cost savings and why is it important?
Organizations should always looking to save money, particularly in tough economic times or after long periods of experiencing “cost creep”.
Building and maintaining a cost savings capability is important because it enables an organization to build cash reserves to withstand economic threats and make investments to create competitive advantage.
What is less obvious is that cost savings is many times more powerful than revenue generation when it comes to impacting cash flow. For example, if an organization operates on a 10% cash flow margin, then every $1 in cost savings has the same benefit as $10 of additional revenue. In other words, if you were to identify $100,000 in cost savings, you would need to increase revenue by $100,000,000 to achieve the equivalent increase in cash flow.
How does Definitive help facilitate this process?
An executive-led initiative is often needed to drive cost savings at the enterprise level because many organizations have a decentralized approach to expense and spend management. As such, its critical to bring together representatives from every corner of the organization to identify cost savings opportunities and to assist in the evaluation and selection process.
Definitive’s role is to facilitate: the establishment and weighting of the selection criteria that will be used by the team; the review and evaluation of potential investments; trade-off analyses; and the decision-making process.
Definitive also assists the customer by managing the business process, developing job aids and reports, and providing and maintaining the support tools, such as Definitive Pro™ and Microsoft SharePoint.
Example Decision Model
Definitive Pro™ enables the cost savings team to collaborate anytime, anywhere, using any device. By making it easier to participate, we: bring together representatives from across the organization; promote teamwork; and improve cross-functional insight.
Definitive Pro™ uses the Analytic Hierarchy Process (AHP) to accurately establish the relative importance of the decision criteria, and efficiently score all cost saving alternatives. The consistent and transparent scoring process yields greater consensus and buy-in than other approaches.
Definitive Pro™ employs the Gurobi optimizer®, a state-of-the-art mathematical programming solver for optimizing the allocation of resources. The Gurobi optimizer can quickly identify the set of cost savings alternatives that maximize strategic benefit, while satisfying all dependencies and constraints.
Faster and better decisions — Justifiable decision rationale — Historical record of decisions
Definitive Pro™ also powers group decision support for:
- Budget Formulation
- Business Opportunity Selections
- Business Partner Selections
- IT Demand Management
- Merger & Acquisition Selections
- Personnel Selections
- Product and Feature Selections
- Requirements Prioritization
- Risk Assessments
- Strategic Investment Selections
- Strategy Development
- Surveys and Audience Response
- Vendor Selections