7 Cost Reduction Techniques in Project Management - Teamly

Cost-cutting vs. cost reduction: what's the difference? · 1. Ensure proper allocation of resources · 2. Mentor and retrain your team · 3. Outsource on an as-needed ... ProjectManagement 7WaystoReduceCostinProjectManagement by AnnaAghlamazyan Max7minread 7WaystoReduceCostinProjectManagementYou’veputeverypossibleeffortintopreparingathoroughestimateforyourproject.You’vecutcornersandaccountedforunexpectedcosts.Butnow,whentheprojectishalfwaythroughcompletion,you’vebeenorderedtotrimthecostfurther. You’restuck.Howdoyoudoit?Mostimportantly,howdoyoucutthebudgetwithoutcompromisingquality?Isitpossibletoreworkthestartingideaintoasuccessfuloutcomeandstilldeliveronyourstrategicobjectives? Deployingeffectivecostreductionmethodsinprojectmanagementisnoeasyfeat.Don’tfeelrejectedorfrustrated.Instead,getprepared!Notethatmanagingaprojectbudgetisacontinuousprocess,andeveniftheinitialestimatehasbeenapproved,changesaregoingtohappenmidwaythroughtheproject. It’sgoodtobeinformedabouttime-testedcostreductiontechniquesinprojectmanagementtoactearlyandpreventbudgetslippage.Butbeforewedelvein,let’s,firstofall,definetwotermstoclearanypossibleconfusion. Cost-cuttingvs.costreduction:what’sthedifference? Cost-cuttingisappliedtoreduceexpensesdirectlyandboostthebusiness’sbottomline.It’sareactiveapproachtocostmanagement.Costreduction,ontheotherhand,ismoreaboutoptimizationandbetteraligning.It’saholisticviewoftheprojectlifecycle,wherethetraditionalapproachisreplacedwithrethinkingrequirements,freeingupresources,andincreasingefficiency.Toadoptproactivetactics,you’llneedtohaveaclearstrategybeforemakingadecision. Asapreparatorystep,you’llneedtoclassifycostsintoso-called‘good’and‘bad’ones.Goodcostsservebusinessobjectives,createvalueforthecustomer,andenablegrowth,whilebadcostsdestroyvalueandwasteresources.Withacarefulclassification,you’llredflagthecoststhatdoharmandfocusonthosethatcontributetobusinessadvancement. Let’snowgetacquaintedwithsevenquicktipstohelpyouimplementsustainablecostreductionmethodsinprojectmanagementandaddresscostdriversattheircore. 1.Ensureproperallocationofresources Resourceplanningisthecriticalprocessofidentifyingtheresourcesrequiredtoexecuteandcompleteaproject.It’sdoneatthebeginningoftheprojectbeforeanyactualworkbeginsbecausewithoutproperresourceallocation,youruntheriskofcausingbudgetoverrun. People,equipment,andtimearethekeyareasyou’llneedtolookinto.That’swhyidentifyingandassigningtherightresourcesduringtheprojectinitiationphaseisessentialtodeliveringprojectswithintimeandbudget. Forasmoothprocess,centralizeresourcesandinformation.Thiswillallowyoutobalanceresources,avoidduplication,andreduceresourceidling. Hereisaprotip:assesstheimpactoftimeonresourcerequirements.Forinstance,acriticalresourcemaybeavailableforonlyalimitedperiodoftimewhichmeansyou’llneedtoadjustyourproject’sscheduleaccordingly.Conversely,ifaresourceisgoingtobeavailableonlyatalaterstageoftheprojectcompletion,youmightneedtoextendthetimelinetoaccommodatetheavailabilityoftheresource. 2.Mentorandretrainyourteam Resourcesarenowoptimallymappedanddistributed.Everypossibilityofcostreductionhasbeencarefullyconsidered.Thenextstepforprojectmanagersistodevelopadetailedworkbreakdownstructure(WBS).Lookateachsubtaskandidentifyhowmanypeoplewithwhattypeofskillsareneededtofinishthetask.Rememberthatassigningunder-qualifiedresourceswillcausedelaysindeliveryandcompromisethequalityofresults. Effectivemanagementavoidshiringresourcesattheeleventhhour.Ifyouencounterworkforceshortageatanystageoftheprojectlifecycle,retrainingcanbeasmartsolution.Explorethein-housepotentialbeforeyoureachouttooutsideconsultants.Forinstance,insteadofhiringanindependentcontractor,youmayconsidertrainingyourteamtogetthemuptospeed. Replacingexpensiveresourceswithcheaperonesisamerecost-cuttingstrategythatisn’tsustainable.Therefore,considerhavingyourmoreexperiencedteammembersmentorthefolkswhoneedthatlittlepushtounearththeirfullpotential.Thereisanaddedbenefithere.Upskillingjuniorresourceswillincreaseorganizationalagilityanddrivemotivationfurther.Researchisavailabletobackupthisstrategy.RecentstudiesbyGartnerindicatethat,especiallyduetotheevolvingCOVIDpandemic,companieswillhavetoadjustcareerpathingstrategiesandmaketargetedtalentinvestmentstowitnesscontinuedgrowthandoutperformcompetitors. Projectmanagersmayassignthehighestskilledpersonneltohigh-prioritytasks.Avoidthistrap.Whenyouthinkaboutcostreductiontechniquesinprojectmanagement,youshouldconsiderdistributinghigh-skilledresourcesacrossallprojects.First,thiswillminimizetheneedforhiringexpensiveindependentcontractors.Second,thiswillprovideauniqueopportunityforotherteammemberstogetvaluableprofessionalguidance.Keepinmindthatteam-orientedandforward-lookingtacticsarealwaysrewardedinfutureprojects. 3.Outsourceonanas-neededbasis Startbyexploringthenon-coreactivitiesofyourbusiness.You’llmostprobablyfindtasksthatdon’taddsustainablevaluetoyourbusinessandarelimitedtoasingleproject.Theseactivitiesarethefirstonestobeoutsourcedtolower-costspecialists. Furthermore,youmaylackaspecificskilllocally.Haveawell-thought-outpolicyinplacetobeabletoleverageglobalresources.Low-costresourcescantemporarilyfillinthegapandhelpyoucontrolthebudget. Andwhatifacriticalresourceleavestheorganization?Last-minutehiringmaycausedisruption,createchaos,andcompromisethebottomline.Ifyouhaveapredefinedoutsourcingprocessandknowwhatfactorsinfluencesuccessfuloutsourcing,you’llpreventfailureintheeventthiscriticalresourcedecidestoleave. 4.Analyzevariancesbetweenforecastedandactualspending Thetimerollson.Youcontinueoverseeingtheentireprojectthroughcostcontrolandriskassessment. Whenyousearchforcostreductionmethodsinprojectmanagement,youshouldacknowledgethatperiodicallytrackingeachmilestoneisabsolutelycrucialtopreventdiscrepancies.Rigorouscomparisonoftheactualspendingagainstthebaselinebudgetcanmitigatebudgetoverrunandhelpyouspotopportunitiesforcostreductionbothinadvanceandonthego. Thegreaterthedeviationbetweeninitialestimationandactualcosts,thelesslikelyitisforyourprojecttosucceed.What’smore,goingoverthebudgetaffectsprojectprofitabilityandmayevenjeopardizetheproject’scompletion(youmighthavetoseekadditionalapprovalfromdifferentstakeholderstocontinueyourwork). 5.Accountforhiddenandunexpectedcosts Hereisanexample.Youhadyourproductcatalogreadyandsenttoprintingonlytodiscoverthatthreeproductshavethewrongdiscountedpricesonthem!Luckily,youdon’thavetheentirecatalogprintedyet,andthereisachancetoreplacethatonepage.Doyouhaveabudgetallocatedforsuchmishaps? Fromminorincidentstomajorrearrangements,last-minutehick-upsareinevitable.Theydocostmoney,butifyouaren’tpreparedtohandlethem,thoseunexpectedcostscanbreakthedealandevenaffectyourbaseline.That’swhenthegoldenrulecomesintoplay–reserve10-20%ofthebudgetforunpredictedcircumstances.HaveyourplanB.Projectsrarelygowithoutanydeviations.Todelivertheprojectonbudget,accountforanappropriateamountofmoneyfortwistsandturns,unplannedhiring,orchangestotheprojectscope. 6.Seekprocessimprovements Lookforanddetectmoney-savingprocesschanges.Thinkcriticallyaboutwhichprocessescanbestandardizedandstabilizedtopreventmajorvariations,establishcapability,andpreventdefects. Askyourteam:canweachieveourfinalgoaldifferently?Isthererework,double-handling,orbackflowthatwecanavoidandreducecost?Forexample,isitpossibletodoworkremotelyinsteadofrequiringofficevisits?Isitpossibletoaccomplishthistaskthroughajointsessioninaweekratherthaninthreeweeksusingthepredefinedmethod?Divedeep,analyze,andcomeoutwithsolutionsthatyoudidn’tthinkwerepossible. 7.Reduceprojectscope You’vecheckedandrecheckedtoensuretheprojectcostisaccuratelycalculated,reflectsthereality,andalignswiththebusinessstrategy.However,theoverallcostremainsaconcern… It’stimetotryanothercostreductiontechniqueinprojectmanagement:reconsideringthescopeoftheproject.Isittoobroad,oristhereanythingyoucannegotiate?Isthereataskthatisspecificallycostlyandcanbecutback?Isitpossibletoleaveoutaparticularphaseinaproject? Althoughthescopeoftheprojectwasdeterminedattheinitialstage,youmaystillspotcertaintasksthatcanbecutdown.Startnegotiationswithdifferentstakeholdersinvolved–investors,vendors,partners,customers,etc.Singleoutthemostcriticalprocessesandgoalsandseeifanyofthesmaller,little-valuerequirementscanbeomittedwithoutaffectingthemarginyouaimfor.Findoutifyoucanachievethesameresultswithfewerresources,fewerpeople,orlessexpensivetechnologies. Let’ssumup! Costmanagementisanongoingprocessandrequiresconstantmonitoring.Luckily,costreductionmethodsinprojectmanagementarediverse,andyourfinalgoalshouldhelpyoudeterminewhichonestopick. Quicksavingsareeasiertoachieve;youcutcornershereandtherebyeliminatingunnecessaryexpenses.Becareful.Gobeyondshort-termcostcontainment.Developsolutionsandbuildtoolsthathelpyoureallocateresourcesandcreatesustainableimpact.Thiswillkeepyourteammotivatedandwillnevercompromisethequalityofthedeliverables. TableofContents 7WaystoReduceCostinProjectManagementCost-cuttingvs.costreduction:what’sthedifference?1.Ensureproperallocationofresources2.Mentorandretrainyourteam3.Outsourceonanas-neededbasis4.Analyzevariancesbetweenforecastedandactualspending5.Accountforhiddenandunexpectedcosts6.Seekprocessimprovements7.ReduceprojectscopeLet’ssumup! ManageyourEntireTeam, RemotelyWithTeamly.Getyour 100%FREEaccounttoday. 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