Challenge: How to take out cost quickly?
From a shadowing role to strategic development
After five years under a fixed price contract, the client team had developed a good understanding of the cost run rate and had recognised that savings from that model had been maximised. As well as reducing headcount, the client team also wanted to move from a tactical, shadowing role to contribute more to the strategic development of the portfolio.
A new contract arrangement – known as the ‘ownership’ model - was negotiated. This is essentially a cost re-imbursable model built upon trust between customer and provider, with the customer delegating much more responsibility over tactical decision making. The successful contract management regime utilizes weekly joint multi-functional/multi-regional calls with a face-to-face quarterly strategic business review.
Against this background, the Johnson Controls' Global WorkPlace Solutions team generated options for 5%, 10% or 15% savings, creating a standard template for collecting and assessing ideas, issuing guidance to teams so that there was agreement on terminology across regions and utilizing ideas and experiences from other accounts. The result was a balance of strategic structural and more tactical measures.
Local knowledge and solid relationships were vital in generating the options and advising on approaches to address business continuity issues – a business directed approach to maintenance was adopted with analysis of what equipment could be run to failure and where failure of key plant could result in unacceptable costs of business disruption.
Implementation required a number of key enablers, the most important of which was executive mandate – this meant there was no need to ‘sell’ the change initiatives at the local businesses level – which could have killed many of the initiatives. Also a necessity was a joint recognition that this was not a one-off exercise, but a fundamental change to a culture focused on total cost management, and treating all costs as investments. It is about re-setting everybody’s expectations regarding service levels being appropriate to the businesses goals and investing enough to achieve those goals.
Our response to the challenge was on target - the client commented that he had “never before experienced a company respond so quickly with a roadmap to achieve such ambitious goals in such a short period of time.”
Since inception of the contract, significant savings have been delivered, enabling the customer to be more competitive.