European companies still rely on traditional methods for controlling overhead costs

Preliminary results of a European-wide survey on cost-saving programs in the field of overhead spending.

European companies control their costs and expenditures in clearly defined periods. This is the result of a study undertaken by EBS Business School in Germany and Expense Reduction Analysts. Based on the study 72% of the companies stated that they periodically control costs. 65% were of the opinion that they immediately react to a deterioration of their cost situation. Almost a third of the companies however prioritize an increase of their turnover over the reduction of costs.

Furthermore, the survey shows that companies consider non-core spending an important area. 83% out of 301 companies that took part in the survey said that they had carried out a process in reducing their non-core spending within the past 3 years.

One third of these companies used specialized consultancies in that process. Based on the results of the survey, European companies perceive categories like Energy (43%), Marketing (28%), Logistics (27%) and Freight (25%) as the biggest cost drives and most important areas in the field of overhead spending. Three out of the top-4-categories are within energy-intensive sectors. Other important cost categories are Travel Management (20%), Facility Management (20%) and Telecommunication (19%).

The major reason for companies to start cost reduction programs is the failure in achieving their respective financial goals. 51% of the companies confirmed starting cost saving programs since they did not reach their desired profit margin. 29% said that their company was not profitable enough in comparison with their competitors and for 23% losses in the operational business were the reason to optimize their non-core spending. Hence, the majority of European companies tend to only react to changes or pressure instead of actively managing and comparing their overhead costs.

When it comes to identifying potential for improvements the companies stated that these saving potentials were mostly indentified by internal sources (70%). 28% of the companies relied on external help identifying cost saving potentials.

When carrying out cost saving programs traditional instruments and methods like cost controlling and negotiations are mostly used by European companies. Almost 63% of the companies stated that they used cost controlling as their major tool; 60% use negotiations. An active price comparison of costs through purchase price analysis or benchmarking is only used by 43,5% and 42,5% of the companies. An overhead value analysis tool that is especially designed for overhead-cost management is only used by 12% of the companies.

The complete study will be available by end of august on this site.