“Never let a serious crisis go to waste” is a widely used quote in this day and age of COVID-19 issues and extremely low oil and gas prices. An exceptional situation is a good opportunity to look closely at the focus and efficiency of your activities. However, it is easier said than done. There are many things to consider in a crisis period: the market changes and the costs persist.
Tresviri is specialized in optimizing these processes and in reducing costs. We focus on technical projects and maintenance, but our working method also works in other sectors. We will now give some tips & tricks on how we do this.
First, you have to set the right mindset. You have to distance yourself and look at your own organization with objective eyes. Clearly define what your profitable activity is, what are the main processes and the supporting processes.
Assessing a process always has 3 steps:
- Determine what the process adds (what is it for).
- How many resources the process uses.
- What happens if the process is not carried out or is underperformed (in terms of time or quality).
We recommend that you always start by assessing your supporting processes. However, we do not believe that the method of “ranking” processes works. Because awarding points and making a decision is usually counter-productive. On the other hand, involving employees in analyzing the process always works best.
Improving the processes
When improving processes, focus on reducing the amount of process steps and on reducing the amount of resources the process is running on. Tresviri also relates the costs of process and the realizable savings to process improvements. However, we will not discuss this in the present article.
Costs are the result of performed activities and purchased goods. At this stage, we assume that the processes have already been optimized.
The basis of cost savings are:
- Relevant knowledge of (supporting) processes must be, remain or become available within the organization.
- Employees should be aware that these savings have no (direct) influence on their employment contract.
Organizations know very well how their core market works. However, the market of support services is often a grey area. Suppliers determine their sales price on the following parameters:
- Market conditions
- Dependence on the customers
Price is a cost that is not listed here. That is a precondition for the price, but not a direct parameter.
To reduce costs, the organization can take actions to reduce the risk to the supplier and reduce the dependence on the supplier. Naturally, a distinction must be made between the purchased products. Microsoft’s dependence is different from the dependency on a valve supplier. But, by making the right choice in terms of risk and dependence, the negotiating position of the organization improves significantly.
Once this framework is in place, the purchasing strategy can be set up and implemented. With focus on the continuity of the main process, the suppliers are evaluated again, and tenders are offered in the market as well.
The method of optimizing processes and reducing costs has proven successful. Using this method for turnarounds, we have been able to achieve cost reductions of 30%, while maintaining the availability of the installation.
In a nutshell, this is what Tresviri does in terms of cost savings. In a crisis, companies are thrown back to considering the performance of their basic tasks. Many support tasks run at half strength and it appears that production often suffers from this to a limited extent. As such, now is a good time to evaluate whether processes and subsequent costs should be brought back to the same level after the crisis.
Tresviri can assist in this process.
Cost Engineer at Tresviri Cost Engineering Solutions B.V. and specialized in cost savings processes.
Tresviri is a company that specializes in Cost Engineering. We work in the area where technology and costs come together and through our years of experience and background we have built up a great expertise.