Method No. 2: Analyze your enterprise architecture
Infrastructure overhead (buildings, departments, IT systems, equipment processes, etc.) often comprises the bulk of an organization's costs. Therefore, a recession is the ideal time to figure out what is critical and what can be eliminated. But eliminating or reducing fixed overhead costs is difficult because most organizations do not have enough information to make educated decisions about what is wasted cost and what is critical to running the business.
Investing in a good Enterprise Architecture (EA) software tool can help organizations evaluate and make critical infrastructure decisions that can dramatically reduce fixed-cost expenditures and ensure that any reductions-whether they be related to physical capital or human capital-are the right reductions to make. With an EA tool in place, organizations can easily create graphical models of the entire organization and map out the interrelationships between locations, people, processes and systems. Here are three ways EA software can help you in a recession:
1. Identify duplicate or underutilized overhead
By creating graphical models of the functions and supporting assets across the entire organization, it is very easy to identify areas of duplicate effort (for example, people performing the same or similar functions, systems that are redundant or databases that house the same information).
In addition, an EA tool provides detailed analysis capabilities that enable you to identify resources that are underutilized and better understand what can be consolidated (for example, people who are only busy 50 percent of the time, site locations that only service a handful of customers and systems that are rarely accessed). Armed with this information, you can make informed business decisions and consolidate these underutilized assets for immediate cost savings.
2. Optimize your value chain
Understanding the interrelationships and cost/benefit analysis of your supplier relationships, your customer relationships and the logistics that serve as the foundation of your value chain is critical. It is critical because this is often a high-cost area, but it is also an area where cutting costs can pose a risk to customer service and quality. An EA tool can help you analyze your value chain, identify areas of inefficiency, and weed out underperforming partner and customer relationships without unwanted side effects.
3. Quickly and effectively assimilate mergers and acquisitions
Companies involved in a merger and acquisition transaction must quickly determine how to integrate assets, assimilate people and functions into a single organization chart, and define a consolidated set of effective business processes. An EA tool can provide the means to create graphical models of both organizations to serve as the starting point, and then help decision-makers evaluate, define and implement the right consolidation plan.
Going into any effort with the big picture in mind is always the best approach, and making massive cost reduction and restructuring decisions during a recession is no exception. Leveraging an EA tool with graphical modeling and analysis capabilities helps you get a realistic grasp on the big picture and provides critical support to help you make smarter, more effective business decisions. Doing the right things now will ensure that you are well-positioned to leap forward as a faster, more effective and more agile organization when the economy rebounds.