Newsletter - May 2008

Operational Cost Savings - The importance of the right tools
By Ian Beaumont, Managing Director, Matrix-Data Solutions

Since 2005 there has been speak of a global recession but now more than ever it is looking like a real likelihood. Rather than running scared the general mood seems to be one of “the show must go on”. This is not to say that it is going to be the same show, every CEO, CIO and COO that we speak to in the financial industry have told us that they are making subtle changes to their business models, all of which have some focus on increasing operational efficiency while continuing to lower costs.

It usually falls within an organisation’s finance or operational department to look at areas where potential savings could be made. Every area of a company has different requirements and systems and although they all contribute to the same end goal often they have systems, processes and costs that are stand-alone. To find any savings involves a great deal of research into the different parts of the business including the various partners and service providers, which can be very costly in terms of man-hours. In many cases this process is outsourced to well known business consultants to make their recommendations.

The assumption is that the consultants are able to identify areas for cost savings that will equate to more than the fee that they have levied for their services or they would no longer be in business. We do not negate that they offer an invaluable service but what we suggest is that before this step is taken, it would be advantageous to bring in a customer and business intelligence specialist like Matrix Data Solutions.

Our approach is very innovative and yields some surprising results. Matrix Data Solutions looks at all of an organisation’s customers and the way that it interacts with them on a transaction by transaction basis. We then split the transactions based on various criteria to capture and segment the different interactions by for example, channels, products and time period. At this point we apply the revenue and costs associated with each one and construct a flexible data model that allows profitability analysis by any variable (product, channel, time period, type, etc) allowing clear identification of those interactions that make money, and of course, those that lose money.

We then revue the supply chain and business rationale behind all those that are either costing money or are marginally profitable. Because of the granular detail of our process we can highlight some areas of the business that may be surprising, like the true cost of “loss leaders” that have a marginal marketing/customer care benefit but a severe hidden cost implication. We can draw attention to terms of a particular supplier/distributor arrangement that are onerous and can be renegotiated or highlighted when next put out to tender. We can also focus on the impact of any particular marketing or communications initiative for a particular product or service and give a true Return on Investment. Sometimes we even find customers are being wrongly billed or going unbilled for certain types of transaction or product. This can have reputation as well as cost implications.

Some of our findings can question the market norm and long-held organisational beliefs but give decision makers qualitative analysis of both customer and business practices where savings can be made. In most cases, the potential savings outweigh the costs at least tenfold. In the current market conditions the advantages of this process are clear.

If you would like to find out more please contact us through the website, via email info@matrix-data.co.uk or by telephone on 020 7074 1200.