- Survey of 770 C-level decision-makers: Only 35 percent said that their cost programs were strategically planned
- German managers see “nearshoring” and negotiations with suppliers as the best lever to reduce costs
- Artificial intelligence (AI) is becoming increasingly important, especially with regard to medium and long-term cost targets
- Clear communication makes savings programs significantly more successful
Munich— In times of crisis, cost-cutting programs are popular, but they are not a strategic priority in most companies. For 65 percent of the managers surveyed from 21 countries, the latest cost-cutting programs were an ad hoc reaction to changing market conditions. Only 35 percent said they had acted strategically and with a longer-term plan. This is the result of a recent study by the Boston Consulting Group (BCG), for which 770 C-level managers in 21 countries were surveyed.
Jochen Schönfelder, Senior Partner at BCG and expert in corporate transformation, says: “The pressure currently on the executive floors is enormous: Inflation, geopolitical tensions and the macroeconomic environment are forcing companies to reduce their costs. But too many decision-makers only react when it is almost too late, instead of working strategically on their cost efficiency.” However, continuous efficiency programs pay off, as the study shows. “Always-On” organizations achieve an average of 62 percent of their savings targets. In contrast, the average company can only actually implement 48 percent of the planned savings; in Germany, the figure is 52 percent.
“Nearshoring” and negotiations with suppliers are popular cost-saving methods
50 decision-makers (CEOs, CFOs, COOs) from Germany also took part in the survey. They see “nearshoring” in particular, i.e. relocation of production and processes to a nearby foreign country, as the most effective method of reducing supply chain costs (30%). Negotiating better terms with suppliers comes in second place with 18 percent, and is thus significantly higher than the global average (7%). When asked about the operational measures to achieve competitive costs in the future, the managers from Germany stated that they invest in partnerships and alliances (66%) and relocate their location to cheaper regions (56%), followed by outsourcing in third place (52%). Multiple answers were possible here.
Artificial intelligence is becoming increasingly important for cost efficiency
The use of artificial intelligence (AI), on the other hand, does not seem to have convinced German managers yet, at least in the short term: only 18 percent believe the technology will make a major contribution to cost savings within the next 18 months. However, almost two-thirds (64%) stated that AI makes a significant contribution to their medium-term (18 months to 3 years) cost targets; in the long term (3-5 years), this figure drops to 38 percent. 58 percent are also certain that AI will be indispensable for operational efficiency in the next three to five years – compared to 50 percent internationally.
New technologies and the use of AI can save costs, but they also change the demands on the workforce. In four out of five German companies, the adjustment of work processes has led to skills gaps that need to be closed: 72 percent of German managers said they need to get better at quickly deploying employees in new areas of activity, i.e. retraining them. However, local training programs perform worse than the global average, with only just under 58 percent of respondents saying that training and further education measures had had a positive impact on the cost structure (international: 64%).
Success through transparent communication
Clear information from the top management level in all areas helps to implement cost awareness strategically in the company. 82 percent of cost efficiency pioneers practice this. With success: only 17 percent of the “cost pioneers” encounter a lack of understanding among the workforce or have problems with morale. In the overall group, however, 37 percent have such difficulties. German companies primarily rely on transparency of company performance (76%). 68 percent offer financial incentives to increase cost awareness among the workforce, with communication coming in third at 64 percent.
