Virtas Partners identified SG&A cost reduction opportunities for an electronic component manufacturer following a planned sale of a business segment
Client Need
A publicly traded, global, electronic component manufacturer faced a significantly lower revenue base as it repositioned its product portfolio and end market strategy. Expected stranded costs following a planned segment sale representing 30% of the business may have led to unsustainable SG&A overhead on both an absolute cost and percentage of revenue basis. The client looked to reset SG&A levels where feasible while enhancing SG&A effectiveness to support planned future acquisitions as they implemented the new strategy and reposition the portfolio.
Some functions previously transformed their delivery models to leverage off-shoring; a recent acquisition and disparate delivery models, process and technology in some functions/segments indicated opportunities for further efficiencies and cost reductions.
Although the client’s information technology systems were generally capable, the IT operating model was inefficient due to a fragmented structure and deployment of a common IT roadmap was delayed due to prior cost reduction efforts having upstream implications on sales and marketing, finance, and other functions dependent on data and technology. Changes in desired management reporting without underlying alignment of data and technology further burdened the back office with additional manual information gathering efforts to support recurring operations.
Tailored Solutions
- Established detailed in-scope perimeter, classifying cost centers and employee categories and reconciling to reported results and internal management metrics
- Recast existing financial forecast into a cost baseline by function including elimination of allocated costs
- Analyzed details of selected departments, spend categories, and vendors
- Gathered company specific insights of labor efficiency, spans and layers, and internal organizational benchmarks
- Leveraged targeted 3rd party benchmarks, tailored to the client’s industry segment, geographies and revenue, to confirm areas of cost inefficiency
- Sized opportunities totaling 2% to 4% of cost baseline in Information Technology, Finance, Human Resources, Executive Leadership, & Legal
- Identified processes within Finance, Information Technology, Human Resources, & Customer Service requiring redesign & transformation to enable future cost takeout
Value to client
- External view with data support highlighting difficult realities faced by the functional leaders with specific recommendations for change
- Increased momentum for collaborating and executing a transformation agenda, overcome the perception of limited cost reduction opportunities
- Detailed Information Technology operating model redesign sequencing and future state blueprint
Capabilities
- Financial and Data Analysis
- Benchmarking
- Data Visualization
- Cost Optimization/ Performance Improvement
- Finance and IT functional and Operational Experience
- Unique Labor Efficiency Insight Gathering