5 Steps to Cost Reduction using BPM
In today’s world, every organization aims to reduce costs to achieve higher profit margins and improve their organizational budget. However, developing a cost reduction strategy is not as simple as randomly cutting down budgets or trimming expenditures across the board. Identifying long-term savings opportunities and achieving sustained cost reduction has become more challenging than ever before.
According to the PEX Network Biennial State of the Industry Report 2015, around 22.2% of professionals consider cost savings as the primary measure of success for their Process Improvement Programs. However, cost/budget limitations are a major challenge to Operational Excellence for almost 10.04% of enterprises.
Although there are no shortcuts in organizational cost reduction, a strategic process improvement approach can be helpful. Business Process Management (BPM) is an efficient way to cut down unnecessary expenses. The following steps based on a structured methodology can help reduce costs using BPM.
Know your Processes :
Cutting costs at random will only give you short-term savings instead of forming a robust cost reduction strategy. To achieve cost-effectiveness in the long run, businesses should have a complete understanding of all their processes. A “process library” (the process hierarchy, including core business processes, business process groups, and various business functions) comes in handy for this purpose.
It helps in identifying processes that need immediate attention, highlighting processes that are directly associated with the bottom line of the organization, setting the direction for a thorough analysis, and identifying process dependencies. These findings lay the foundation for a robust business process improvement strategy that can aid in cost savings.
Map your Processes
Creating an end-to-end current-state process map is the second task to focus on for controlling organizational expenditure. It captures an overall view of all the processes currently being executed in an enterprise along with the complete breakdown.
The deeper you dig into the lower-level views, the better you develop the idea of how the processes work, how they are interconnected, and how various expenses are associated with them.
Harnessing the endless potential of business process mapping helps an organization in identifying pain points that require immediate attention, understanding the bottlenecks that need to be eliminated, spotting the gaps between the current-state and desired future-state, finding the presence of duplicate or unnecessary processes, achieving operational transparency, ensuring better communication, and making better decisions.
Analyze your Processes
Analysis of cost is essential for crafting a reduction strategy, and process analysis is essentially the foundation of it. A process can be analyzed in either a quantitative or qualitative way. Quantitative aspects of a business process analysis are usually classified as Process Value Analysis, Process Time Analysis, Process Cost Analysis, and Process Efficiency Analysis.
Qualitative analysis includes behavioral, technological, and procedural aspects of processes. All observations are synthesized to come up with improvement solutions for each of the processes which include removal of process duplicities, deletion of non-value adding processes, merging of two or more processes into one, and incorporation of necessary processes that are missing. This practice curbs some unnecessary costs associated with the processes too.
Identify your Expenses
Defining the costs is crucial prior to finding the reduction opportunities. It enables the process analysts to categorize all the expenses (from the highest to the lowest) and sort out the priorities. There are three effective ways of doing it, which include grabbing every feasible opportunity that ensures cost-cutting, prioritizing areas involving the largest costs, or prioritizing the most accomplishable improvements to make the most of the opportunities.
Implement and Monitor
After identifying cost reduction opportunities, the next step is to implement the changes and monitor their effectiveness. Process improvements should be implemented in a phased manner to ensure that there are no adverse impacts on operations. Monitoring the effectiveness of the implemented changes is essential to measure the success of the cost reduction strategy.
BPM focuses on optimizing business processes to reduce costs, increase efficiency, and improve overall performance. By analyzing and streamlining processes, companies can identify areas where they can save time and money, and improve their ability to compete in the marketplace.
This can help organizations to overcome business challenges and achieve their goals with greater success. Additionally, Prime BPM can provide companies with valuable insights and data that can be used to make more informed decisions and continuously improve their operations over time.
