How BCG streamlined the organization and strengthened the cost competitiveness of a top consumer durables manufacturer.
A global consumer durables company was struggling with profitability and market share loss. Cost competitiveness was the main issue—the company mainly operated in expensive countries, leading to staff and product costs that were up to 20% higher than those of its competitors. In addition, the organizational structure was unnecessarily complex, and many products had excessive features consumers didn’t actually want.
The CEO launched an enterprise-wide cost-reduction transformation with the goal of making the organization more agile and its products more competitive in the market.
The company engaged BCG to understand the cost gap and design and implement a comprehensive transformation to quickly reduce costs—particularly SG&A and product costs. The cost transformation had four main components.
Our experts started with a rapid, six-week diagnostic to benchmark the company’s costs across all dimensions. We analyzed the product portfolio and value chain, looking at the network of suppliers and manufacturing facilities, going factory-by-factory to assess which processes and functions were—or could be—handled in low-cost countries. We also examined products in key segments to identify the biggest cost drivers.
The result of the diagnostic was a roadmap for the transformation—a clear set of priorities for cost reduction, along with targeted savings and a timeline to achieve the goals of individual initiatives.
In the short term, the company revamped its organizational structure to create clearer accountabilities across product lines, reduce complexity, and streamline decision-making. The company also looked at procurement, introducing some new suppliers—including those in low-cost countries—and renegotiating contracts with existing suppliers. Doing so created competition and helped the company become more competitive. Sourcing components from lower-cost countries led to a potential savings of 8%–10% for many categories—and even higher for others, such as plastic and electrical components.
The company applied BCG’s robust, proprietary Design to Value toolkit to understand the cost drivers of products in the portfolio. That data-driven process involved tearing down certain products and determining where design changes could reduce the costs without impacting performance. We also helped the company identify design features that were no longer important to consumers. Throughout the design-to-value process, the company leveraged BCG’s GenAI-powered tools to leverage insights from raw material cost benchmarks to create fact-based claims for savings renegotiations.
In addition to the “what” of the transformation (the targets the company hoped to achieve), leaders also focused on the “how.” To that end, they created a transformation management office (TMO) that served as a control tower for the entire effort. The TMO oversaw timelines and milestones, coordinated interdependencies to track performance across functions, and set the right governance to ensure that the company was realizing impact from the transformation on schedule and staying disciplined to ensure that costs didn’t creep back over time.
Overall, the company is now on track to realize over $1 billion in total cost-saving opportunities. Critically, the transformation also included a strong execution plan, grounded in change management principles and with the right level of governance and transparency. The goal? To ensure that the changes from the transformation were sustainable long term.
Data-driven procurement processes help companies unlock the full value of their digital procurement function.
As the global business landscape grows more complex and politically fraught, companies are struggling to balance cost reduction, supply chain resilience, and access to key markets.
Organizations’ biggest cost is usually operations, making it the first place to seek efficiency and productivity improvements to fund the future.
