Operational Cost Reduction

PIP has developed proven, repeatable methodologies to drive out cost and ensure that newly embedded knowledge and skills can continually improve our clients’ organisations

Control of direct operational costs is critical to creating a high-performance business. PIP has undertaken extensive operational cost-reduction engagements delivering auditable bottom-line savings for our clients.

Our core methodology consists of three high-level steps:

  1. Validate the baseline and build high-level Value Driver Trees to understand the primary operational cost levers, often with short Diagnostics across multiple locations and with our people working at the front line alongside those of our client.
  2. Agree the approach for the levers based on value/ease. Examples of strategies include:
    • Behavioural change. Reducing operational unit costs by improving process efficiency and/or yield.
    • Physical process and operational changes. We repeatedly identify alternatives to current ways of working by going and seeing the front-line operations with a fresh set of eyes.
    • Strategic/Rapid Sourcing. Rigorous approaches to achieving lower input costs from vendors for both major and minor categories/vendors. Read more here >
    • Investment in alternative technology or outsourcing. Develop and escalate business cases in order to move to lower-cost technologies or outsource operational processes.
  3. Rank savings opportunities and implement improvements. We lead and coach an organisation to prioritise and implement improvements as well as role modelling the disciplines to capture value quickly and sustainably.

Our depth of knowledge and experience in operational cost-reduction is distinctive:

  • Operational improvement is at PIP’s core: since our founding, we have been focused on operational improvement. Operations are very much part of PIP, Our consultants have extensive operational experience and understand the difference between a mere recommendation made at a presentation and sustainable change.
  • Our focus is on measurable results: the walls in our head office are lined with charts showing the progress of each team, in unit costs, at their clients. For 18 years we have been systematically codifying and improving our knowledge of each cost lever. This is collated in an extensive, sanitised online library providing an outline of every category: the Value Driver Trees used, the types of ideas that were implemented, the associated challenges faced, the solutions, and the pace of change on the category. This depth of resource enables us to work quickly on our clients’ categories and contribute to the discussion and assessment. 
  • Our industry experience: we have extensive industry experience in resources, manufacturing, construction, heavy industry and services. Our teams are always resourced to deliver the right expertise and experience to each client’s problem rather than relying on a remote industry expert. We have seen the ebb and flow of the business cycle and understand the external environment and the value on operational flexibility.
  • Our emphasis on sustainability: we measure our success on the sustainable change made to an operation. We use the line consistently to drive the change, and coach and mentor your managers on-site to continue the improvement long after our consultants depart.

Recent engagements include:

  • A $140m savings for a major global mining house.
  • An $80m cost-reduction programme for a multi-site manufacturing business on a pay-for-results contract.
  • An $80m cost reductions for a top-three mineral company.
  • A $380m saving for a second-tier metal house.
PIP helped us enormously. After about 15 months, we had taken the better part of $100m per annum out of that cost structure, and the methodologies that PIP established within the business have been very, very valuable tools on a continuous basis.PHIL PRYKE

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