Your Cost-Reduction Strategy Might Be Quietly Killing Growth

For decades, cost reduction has been the golden child of corporate performance. Procurement teams are rewarded for shaving pennies off contracts, cutting input costs, and locking in lower prices year over year. On paper, it works beautifully. On the ground, it’s a different story.

The problem isn’t that cost reduction is bad. The problem is how it’s incentivized—and what it displaces.

Across major organizations, including my years supporting global operations at Pfizer, I saw the same pattern over and over:
Companies undervalue Opportunity Cost.
Or worse, they actively ignore it because the system rewards only one thing: visible, provable, immediate cost savings.

The Hidden Bias: Why Procurement Optimizes for the Wrong Thing

Procurement leaders are measured on:

• Maintaining or reducing current spend
• Minimizing year-over-year price increases
• Reducing risk or supplier exposure (in the best cases)

These are tangible metrics. They’re easy to report. They tie directly to budgets and bonuses.

By contrast:

• Growth potential
• Process efficiency
• Digital transformation
• Supply-chain modernization
• Quality and service improvements

…are harder to quantify, take longer to materialize, and often require major cross-functional coordination. So they get deprioritized—not because they lack value, but because they lack immediacy and personal upside for decision-makers.

In essence:
If the KPIs only reward cost reduction, you’ll only get cost reduction—even when it destroys far greater value elsewhere.

Case Example: When a One-Cent Savings Costs Millions

During my time at Pfizer, my technology and innovation function regularly supported Procurement’s supplier-change initiatives. These were typically driven by one promise: lower annual purchasing cost.

In one case, Procurement proposed switching folding-carton suppliers across more than six European packaging sites. The “savings” looked great on a spreadsheet—roughly one euro cent per carton.

But the operational reality?

• A 12-month switching effort
• More than a dozen professionals involved (Packaging, Engineering, Artwork, QA, Procurement, Tech)
• Hundreds of hours spent validating artwork, qualifying materials, testing equipment, updating systems, and managing compliance

Not a single hour of that was included in the “cost savings” calculation.

This wasn’t a rare situation—this was the norm.

While teams chased fractional reductions in unit cost, the organization incurred massive hidden costs in:

• Lost productivity
• Delayed efficiency projects
• Deferred innovation initiatives
• Disrupted packaging-line performance
• Opportunity costs of tying up scarce talent for a year

And the kicker?
Senior leadership had no mechanism or cultural norm to evaluate Opportunity Cost.
The organization never asked: Is this worth it? Is this the best use of our people’s time?

Spoiler: It wasn’t.

Why “Cost Avoidance” Never Stands a Chance

For a short period, companies flirt with “cost avoidance”—the idea that preventing future cost increases should count as value creation. It is logical. It is real. It is strategically important.

But cost avoidance is also hard to measure, debate-proof, or audit.
Unsurprisingly, it lasts one fiscal cycle before executives decide it’s:

• Too fuzzy
• Too easily manipulated
• Too difficult to tie to bonuses

And like that, it disappears. Procurement returns to what it can prove: cost reduction at all costs.

The Real Cost: Growth That Never Happens

Every hour an engineer, packaging expert, or supply-chain technologist spends helping Procurement chase tiny unit-price reductions is an hour not spent on:

• Automating production workflows
• Reducing waste and downtime
• Improving OEE
• Integrating digital traceability
• Enhancing resilience
• Accelerating product launches
• Optimizing sustainability outcomes
• Streamlining supplier collaboration

These projects drive real, material, measurable enterprise value. But they rarely get prioritized because they don’t slot neatly into the Procurement savings dashboard.

And so, ironically:
Cost-reduction programs often destroy far more long-term value than they create.

A Better Way Forward: Total Value, Not Total Cost

High-performing organizations look beyond price. They evaluate suppliers, projects, and investments through a broader lens:

• Value creation
• Efficiency gains
• Enablement of strategic capabilities
• Innovation potential
• Operational stability
• Organizational capacity
• Opportunity cost

This doesn’t mean ignoring cost—it means stopping the obsession with unit price as the sole metric of success.

Conclusion: Your Supply Chain Can Do More—If You Let It

If leaders continue rewarding only the easiest-to-measure metric (unit cost reduction), they will continue starving the business of:

• Innovation
• Efficiency
• Growth
• Digital readiness
• Resilience
• Strategic differentiation

The companies that win over the next decade won’t be the ones who managed to save a penny per carton.
They’ll be the ones who optimized total value across the entire supply chain.

If you want to break out of the cost-reduction trap and finally unlock the value hidden in your supply chain, MDB can help.

Let’s re-engineer your procurement and operational strategy around Total Value, not total cost.

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