Cost Reduction
Situation
The maintenance division of a multi-national equipment leasing group was charged with reducing spending by at least $13.0 million per year, or 10% of their overall annual spend. The division was given 5 years to achieve this saving. While cost-savings teams were already in place, the company kept hitting roadblocks. Odyssey was retained to assist.
Analysis
Odyssey refined the company's existing cost reduction initiatives and identified key cost drivers and performance inhibitors. Over 60% of the total cost was in the hands of third-party repair facilities or service providers. In addition to the lack of direct control of cost, data was fragmented across more than 20 databases, making information difficult to find. This process drove overall cost reduction and optimized facility resources. It identified areas of cost variance as well as where the cost was most easily controlled. Data analysis included cost by car type, commodity carried, age of car, location of car, and by customer, which would assist in future negotiations, lease pricing and setting strategic company direction.
Results
Over $4 million in annual cost savings opportunities were immediately identified, and the project provided the management team with a more complete strategic view of costs. The Odyssey team worked with the client to develop a roadmap with drivers and performance measures to help achieve the remaining $9 million in year-over-year annual savings. As a result, targeted savings were achieved on schedule.