This profitability improvement project aimed to diagnose the company’s overall cost structure and develop strategies for cost reduction and operational efficiency, ultimately strengthening long-term competitiveness. By conducting a quick assessment of key cost drivers, we identified targeted areas for improvement, ensuring that the client can achieve sustainable growth even under challenging market conditions.
1. Cost Structure Diagnosis and Target Setting
While the client experienced revenue growth over the past five years, rising raw material and labor costs eroded profitability. Leveraging company-wide spend data, we categorized addressable direct, indirect, and CAPEX expenses and established specific cost-reduction targets.
- Direct Cost Analysis: We evaluated procurement strategies for raw materials, packaging, and OEM products, uncovering savings opportunities through consolidated purchasing and the addition of new suppliers. Notably, green coffee beans and dairy products showed substantial cost-reduction potential.
- Indirect Cost Analysis: By optimizing advertising, logistics, and MRO spending, we collaborated with various departments to eliminate unnecessary expenses.
- CAPEX Optimization: We reviewed store remodeling and equipment investment plans to minimize non-essential capital expenditures and maximize return on investment.
2. Key Improvement Initiatives
We developed detailed action plans for each cost category.
- Logistics Efficiency: Adjusting delivery schedules and increasing load factors improved transportation cost savings and vehicle utilization.
- Advertising and Marketing Optimization: We reduced low-ROI YouTube advertising and concentrated on enhancing engagement through social media channels, improving cost-effectiveness.
- Raw Material Supply Chain Reconfiguration: By decreasing reliance on Ethiopian coffee beans and adopting alternative blends, we identified cost-saving opportunities without compromising product quality.
- Expanded MRO Consolidation: Centralizing purchases of consumables and office supplies enhanced negotiating leverage and reduced procurement costs.
3. Project Outcomes and Expected Benefits
As a result of these initiatives, the client identified potential annual cost savings exceeding KRW 5 billion, with approximately KRW 2 billion achievable in the near term. Each improvement action preserves operational stability and promotes ongoing cost reductions.
By proactively adapting to market changes and establishing an effective cost management framework, the client now has a solid foundation for sustainable growth. Strengthened by the improved cost structure and operating strategies, the client is positioned to reinforce its leadership in the industry.
This profitability improvement project aimed to diagnose the company’s overall cost structure and develop strategies for cost reduction and operational efficiency, ultimately strengthening long-term competitiveness. By conducting a quick assessment of key cost drivers, we identified targeted areas for improvement, ensuring that the client can achieve sustainable growth even under challenging market conditions.
1. Cost Structure Diagnosis and Target Setting
While the client experienced revenue growth over the past five years, rising raw material and labor costs eroded profitability. Leveraging company-wide spend data, we categorized addressable direct, indirect, and CAPEX expenses and established specific cost-reduction targets.
2. Key Improvement Initiatives
We developed detailed action plans for each cost category.
3. Project Outcomes and Expected Benefits
As a result of these initiatives, the client identified potential annual cost savings exceeding KRW 5 billion, with approximately KRW 2 billion achievable in the near term. Each improvement action preserves operational stability and promotes ongoing cost reductions.
By proactively adapting to market changes and establishing an effective cost management framework, the client now has a solid foundation for sustainable growth. Strengthened by the improved cost structure and operating strategies, the client is positioned to reinforce its leadership in the industry.