new rules of cost management

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New rules for costmanagement

How ‘corporate virtualization’ is changing the game for Dutch businesses


Business has changed

Businesses around the world have been on a journey, whether deliberate or not, of cost externalization

What was once a labor cost, is now a supplier invoice

A significant portion of any business’ revenues are now being spent outside its own organization


Research aims

Research was conducted by FTI Consulting on behalf of Proxima

Data was gathered from the annual financial reports of companies that were listed as Dutch AEX25 companies between 2009 and 2011

This included collecting figures and calculating labor costs, non labor costs, revenue and EBITDA from 2009 to 2011

The research sets out to explore the extent to which this has occurred in the Dutch AEX25 and explore the implications of this overlooked change

A key and somewhat surprising finding from the research is the extent to which it has occurred. Revenues spent on labor costs now account for only 9.6 per cent across the Dutch AEX25. In contrast, non labor costs account for 76.1 per cent. As the below table shows, it is a continuing trend:


The trend towards corporate virtualization

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Even though the business environment today changes with unprecedented speed, perceptions of businesses continue to be rooted in tradition

What businesses often overlook is the much larger network of associated parties that have an increasing bearing on a company’s performance, longevity and reputation

No longer is a company made up of its people, its offices and its factories. It is now a network of people and organizations supported by, and contractually connected to, a web of suppliers

The results uncovered considerable benefits available to those business that take a more proactive, nuanced and strategic approach to handling their vast spend with suppliers.


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The action is in external costs

The below data is encouraging – and prompts some important questions. Revenue growth over the period stands at an impressive 44 per cent - while labor costs grew just six per cent. Hardly surprising then, that labor costs as a share of revenue have fallen 27 per cent.


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Opportunities in action

Put simply, the supply base needs to be harnessed and encouraged to deliver success that individuals and businesses cannot secure on their own.

The whole is greater than the sum of all its parts.


To access the full reporton ‘new rules for cost management’

About ProximaProxima is an alternative sourcing partner, specializing in aligning our clients’ spend with their corporate objectives.

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