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Zero based budgeting can help firms compete

Managing costs to fuel growth, and making it sustainable.

Overview

Growth is on the agenda for businesses across sectors—even as market volatility remains at an all-time high. CEOs, CFOs and COOs recognize that their organizations must get fit and stay fit to compete amid several disruptive changes, such as rising costs, globalization and competition, and decreasing EBITDA. However, gaining the agility to compete isn’t a one-time exercise, and it’s not about just cutting costs or pinching pennies. Success comes from reinvesting those savings in activities that will drive competitive advantage and revenue growth.

These steps help companies gain the agility to compete:

  • Creating a more efficient operating model that delivers on the business strategy.

  • Embedding process excellence throughout the organization to drive effectiveness.

  • Differentiating by building leading-edge capabilities.

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Defence To Offense

Six winning strategies for growth in consumer packaged goods

Reducing costs is a critical activity—but it isn’t the only way to build an offensive edge in today’s competitive marketplace. To stay relevant, stable and strong in the changing consumer/channel landscape, consumer goods companies must pivot their focus to reinvesting savings to drive growth.

From our experience working with various clients, we have developed six strategies for CPG companies to pivot their focus from taking costs out, to achieving more sustainable growth.

DOWNLOAD THE PDF TO EXPLORE THE SIX STRATEGIES [PDF]

Closed-loop Cost Management

Closed-loop cost management: An engine for growth

This approach helps companies build the finance and procurement capabilities they need to sustain and improve savings over the long term. Closed-loop Cost Management involves helping to achieve full visibility on all operating spend—across business units, categories and geographies to a detailed level—and exploring how the money can be spent more wisely to add value and help drive growth.

The three essential components are:

  • Transparency

  • Accountability

  • Agility

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Zero-based Budgeting

Strategically managing costs to drive competitive advantage and growth

CPG companies have been cutting costs in manufacturing and packaging for years. They have also sought to tackle overhead costs, but have not been able to make it sustainable over time—after one to two years' costs have risen again. What separates the winners from the losers? Getting full visibility on spend, implementing an annual zero-based budget, and embedding cost management into the company’s culture. Learn more about how two CPG companies are doing it.

“ZBB is focused on taking cost out of low value areas and reinvesting that money in the areas that create a competitive advantage.”

Reinvest in Growth

Mondelez International: Delivering $1B in savings with Zero-based Budgeting

Although Mondelez International experienced high growth, it needed to improve operating margins, which were lower than its peers. Mondelez International asked Accenture to establish a zero-based budgeting system that would help it compete more effectively in an increasingly challenging economic environment. Mondelez International and Accenture collaborated to drive companywide cultural change that would help control indirect costs to improve margins and reinvest for growth.

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Reimagining ZBB

Reimagining ZBB infographic​

Zero-based Budgeting (ZBB) is very different from traditional budgeting that tallies the last year’s budget and adds a percentage. ZBB forces the organization to build the budget from scratch each year and justify each dollar spent. Then cultural change delivers ongoing efficiency savings that can be continuously recycled into growth initiatives. This provides CPG companies with the agility to respond to volatile market conditions.

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Organization De-Layering

CPG companies should be looking at their organization structure with an eye towards greater efficiency and effectiveness in talent management, and ultimately in becoming more customer-centric. For example, where in the organization can we drive out costs while maintaining business continuity and growth? How do we re-structure to become more customer-centric? Are we out of shape and spending too much on non-value adding activities? Are we set up properly to develop differentiated capabilities? Organization de-layering looks at both the efficiency and effectiveness of a company's existing organization structure.

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ASEAN Human Capital Analytics

With companies expanding their presence in the region, ASEAN HR leaders need to compete for high quality talent in an increasingly evolving and competitive talent landscape. To source and retain skilled talent in this changing landscape, organizations will need to understand people and create targeted solutions better than ever before. ASEAN HR leaders therefore need to increasingly invest in adopting a data-driven and fact-based approach such as people analytics to manage the organization's talent requirements while addressing the future workforce's specific needs.

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