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UK Water Utilities: Sustainable and rapid cost reduction

UK Water Utilities: Sustainable and rapid cost reduction
Region UK
Sector Energy and Utilities
Offering Organisation Design
Sustainable cost reduction

The Challenge

  • Our client is a water supply and treatment utility company, serving 5 million customers across the UK
  • In order to meet the commitments made to shareholders to operate within the Ofwat Financial Determination in 20/21 (and 21/22), our client needed to reduce its budgeted cost base by around £50m in FY21 from the initial budget proposed (around 7% of their cost base)
  • The company had undertaken three prior rounds of cost saving, of increasing toughness, but was still £10m over budget
  • Over an intensive 6 week period, the Q5 team worked collaboratively with the leadership team to identify and validate savings opportunities to bridge this gap

Our Approach

  • Baselined existing budgets and data, understanding the prior rounds of cost cutting
  • Conducted a set of interviews of key personnel to develop savings hypothesis
  • Stress-tested these hypotheses, incorporating benchmarking to strengthen the evidence base
  • Facilitated workshops with the organisation’s senior management to develop an operating model, to ensure that savings identified had grounding in the organisation’s direction of travel (sustainable cost optimisation)
  • Carried out analysis and design to add rigour to opportunities, to ensure that people, process and supplier related savings were achievable and that risks and mitigations were understood
  • Facilitated a number of executive review sessions to add ownership, ratify savings and agree accountability for delivery

Key Outcomes

  • A projected rate savings in excess of £10m target, with further stretch opportunities identified
  • A set of savings opportunities, owned by the leadership team, with clear accountability and empowerment for delivery
  • Opportunities which drive towards a target operating model, rather than eroding organisational effectiveness in search of short term efficiency
  • For opportunities that required further design, planning was done to understand time, resources and process required

What our clients say about us

”We work with a lot of consultancies, and very few have gained the trust and support of our leadership in a way that Q5 has been able to in such a short time”

Programme sponsor and Group CITO
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