Captive Finance Company (CFC): Productivity System
CFC’s parent company felt that the entire company’s costs were out of control in an environment of stagnant sales. The parent made a strategic decision to have all departments and divisions reduce their absolute operating cost by 5% per year for five years.
Although the parent company was in a stagnant sales environment, CFC was growing substantially through increase market share. The management of CFC got approval to allow absolute costs to increase if CFC could demonstrate that it was reducing cost per unit by the 5% task. As a result CFC began designing a productivity tracking system that would allocate costs within a matrix of function and products. Before the system was completed, the original designer left.
Why Goff Associates, Inc. (GAI)?
GAI had done a substantial amount of analytical work for CFC on cost budgets, forecasts and business plans, so it was a natural fit. GAI had also previously demonstrated strong analytical and programming expertise on other projects and was working on other projects at the same time.
GAI worked out the structural problems with the program and put it into production after adequate testing in sufficient time to meet the reporting requirements of the parent company.
GAI then worked with operations, systems and other departments to identify and forecast savings from different initiatives. The System was fully integrated in the forecast, budget and business plan and variance reporting systems.
GAI worked closely with the Process Efficiency Task Force to identify projects that would achieve the objectives. The initiatives were prioritized and placed in the business plan.
Implementation of the system and the processes allowed the management of CFC to demonstrate that they were operating the company at 5% greater efficiency per year over the five year period. Efficiencies of over $375 million were demonstrated.