Xerox Unveils Sweeping Plan to Cut Costs, Simplify Operations

At its Investor Day meeting held on February 5th, Xerox executives laid out a number of new initiatives – including 3D printing (see here) – while Steve Bandrowczak, president and chief operations officer at Xerox, outlined how Xerox is seeking to reduce costs and simplify its operations in order to increase revenue and grow its business.

Targets $640 Million in Savings

Xerox is targeting some $640 million in savings for 2019, with much of the cost-saving measures projected to be derived from Xerox’s Project Own It program, and some of which have been through job layoffs that mainly involved executives.

Xerox is targeting:

  • $85 million to $105 million in anticipated cost savings for shared services centers via: partnering with top-tier providers; “optimizing” the workforce; and simplifying processes using robotics and automation.
  • $140 million to $160 million in anticipated cost savings related to procurement via: supplier rationalization/rate reduction; creation of a Global Spend Control board; and reduction of the gap between direct and indirect cost benchmarks. Xerox’s goal is to reduce the number of its suppliers from approximately 8,000 to 3,000.
  • $90 million to $110 million anticipated cost savings for IT costs via: reduction of application portfolio by approximately 50 percent; promoting automation and simplification; and termination or consolidation of vendors. The goal is to reduce IT costs from costing 4 percent of revenue to 1 percent of revenue.
  • $140 million to $150 million in anticipated delivery cost savings via: deal governance; enhanced remote problem solving and help; establishment of preferred suppliers; and integrated account management and specialized hubs.
  • $15 million to $25 million in anticipated cost reductions for Xerox’s supply chain via: SKU simplification; improved inventory controls; and improved supply-chain logistics. The goals is to reduce the number of SKUs, as hundreds of SKUs are said to increase inventory costs; Xerox will seek to simplify its SKUs by up to 16 percent.
  • $20 million to $30 million in anticipated real-estate cost savings: Xerox will perform a global real-estate portfolio review, and says it will reduce its global footprint by approximately 50 percent. The goal is to reduce Xerox real estate from 555 locations and 8.4 million square feet to 261 locations and 6.2 million square feet.
  • $150 million to $175 million in design and benefit anticipated cost savings via: reduction of organizational layers and “addressing” of “low performers.”

Making it Easier to do Business with Xerox

A big part of Xerox’s new roadmap is making it easier for customers to do business with Xerox, and, as such, Xerox will seek to be “flatter, more agile, faster to respond to customer needs,” which will include these initiatives:

  • Streamline the contracting process.
  • Track and trace supply orders.
  • Use new tools to help customers fix their issues faster themselves.
  • Leverage Automatic Meter Reads and Supplies Replenishment.

To increase its organizational speed and agility, the firm will seek to increase the speed of decision-making with these initiatives:

  • Reduce order-to-install times.
  • Leverage a single global delivery model with common processes.

To provide better information to customers and partners, Xerox will:

  • Improve inventory and supply visibility.
  • Provide more accurate billing and flexibility
  • Enable faster and more accurate customer data retrieval through automation.
  • Configure Xerox copier/MFPs and printers to send predictive fault and consumables data to its support organization.
  • Employ data analytics and software bots, as well as video and chats to make service more efficient.

Making Delivery More Efficient

Xerox will be seeking to transition from Regional Delivery organizations that consist of over 300 role definitions, 13 layers, and limited leverage of shared services, with an “isolated” XBS (formerly Global Imaging Systems), to a simplified global delivery model with 30 roles and 8 layers

It will also seek to transition from what it calls limited supplier quality, often deal-based engagement, to pan-regional suppliers for core capabilities (U.S.-vended print from 159 suppliers to a target of two).

Fuji Xerox

Despite some warnings from Xerox CEO John Visentin in the last several months that Xerox might look elsewhere for sourcing equipment, Xerox says its relationship with Fuji Xerox is “stable.” Fuji Xerox is Xerox’s joint venture with Fujifilm, and is a major Xerox equipment supplier. Visentin had warned that Xerox might not renew its technology agreement with Fuji Xerox, but that doesn’t appear to be the case, at least for now.

Investments and Growth

Along with 3D printing, Xerox is also focusing on IT and cloud solutions; robotics; analytics; delivery solutions; and ecommerce and channel enablement.

Our Take

Xerox activist investor Carl Icahn has long criticized Xerox for alleged inefficiency and failure to control costs. With an Icahn-friendly regime – including CEO and board members – now installed, the Icahn plan to reduce costs and make Xerox more efficient is in place and the stage is set. Will the “new” Xerox deliver? Stay tuned.

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