2. Types of Costs
Productive Costs: Provide value to customer
Support Cost: Necessary, but don't benefit Customer
Waste: No value to customer
3. Avoid Waste
By rectifying mistakes
By not producing items that nobody wants
By eliminating some of the processing steps that may not be
required.
By stopping movement of employee without purpose
By unwanted transport of goods or movement without real
purpose
By expediting the upstream activity, so that people or assets
may not wait idle
By measuring all the costs and inputs of a particular process.
4. Form of Waste
Waste of material
Waste of machinery
Waste of money
Waste of customer
Waste of supplies
Waste of manpower
Waste of space
Waste of ideas
5. Organizational control
Planning & control
Effective controls
Controls through teamwork
Visible measurement
Measurement of failure
Risk Management
Value added activity
Elimination of non value added activity
Change control
Standards
Good Housekeeping
6. Effective Controls
By measurement, appraisal and actions
Process work right
Process work on time
Process work economically
Process work fast
Process work when customer change their mind
7. Management control
Financial control
Organizational control
Production control
Quality control
Stock control
Debtors Control
8. Profit planning, control & improvement
Budget & budgetary control
Marginal costing
Cost volume profit analysis and break even charts
Differential & comparative cost analysis
9. Strategic thinking about cost control
Does the cost allocation mechanism work?
Can functional heads distinguish those costs assigned to their
activities over which they may have some influence?
Are Managers fully aware of the cost implications of their
own decisions?
10. Two forms
Restraints: Weak & over detailed and stifle the initiative of
managers
Freedoms: Often fail through inadequate information on full
costs
11. Cost control & cost reduction
Cost Control Cost Reduction
Represents efforts made towards Represents achievement in
achieving a target or a goal reduction of cost
To set up a target, ascertain Not concerned with the
actual performance & compare it maintenance of performance
with Targets, check variance & according to the standards
take measures Assumes existence concealed
Assumes existence of standards potential savings.
or norms which are not Corrective function
challenged
Continuous process of analysis
Is a preventive function, costs are
optimized before they are The main stress is upon in Why
incurred of a thing.
Lacks dynamic approach
12. Why controls?
Better planning
Improved motivation
Economic use of time
Improved competitive edge
Increased commitment
Better decision making
Improved efficiency
More profit
13. Planning overhead cost control
Establish company objective and targets
Develop detailed programmes
Organize resources to meet the objectives
Establish performance standards
Develop a system of budgets
Report on performance
14. Basic elements
Productivity:
More production in lesser manpower
Or
More manpower to produce even more
15. Doing more with less
Deliver more of Profits, Productivity, Quality, Sales
With less of Money, Staff, Time, Machinery
16. Strategy
Is a means to achieve goals
Links all parts of an organization
Covers all major aspects of an organization
Is a long term plan
Ensures that all parts of the plan are compatible
Identifies basic issues such as
What is our business?
What should it be?
What are our products/services, functions, markets?
What should we do to achieve our objectives?
17. Strategy
Is a result of analyzing the strength & weaknesses of the
organization
Determining opportunities & threats
Is an organization’s planned response to its environment over
time.
18. Elements of Strategy
Goals/objectives to be achieved
Policies for action
Programme to achieve goals within the set limits.
19. Strategic Costs
Can you define your strategic costs?
What is your attitude towards costs?
What is your approach towards cost cutting?
Do you practice the new art of cost cutting?
What can you do yourself to cut costs?
Are your profits cost effective?
25. Agree with suppliers to take five days longer credit
Cut debtors days by five through better collection
Reduce stock by 5% by using Material Management
techniques. (JIT, FIFO etc)
Get one new customer per day/week
27. Do we need procedures and processes?
If yes when?
28. 4W1H
Why: Is it necessary? Should it be done at all? Why?
Where: Should it be done? Here or somewhere? Why?
When: Should it be done? Now, sooner or later?
Who: Should do it? Same person, other persons?
How: Should it be done? As at present or another way? Why?
29. Efficiency & Effectiveness
Efficiency: is to know everything
Effectiveness: is to deliver on time or before time.
30. Concept Description Characteristics Measurement
Efficiency Are we doing things Easy to monitor and Activity level,
right? measure against Costs
standards but not
always linked or
identifiable with
ultimate goals
Effectiveness Are we doing the Indirect, subjective Revenue
right things? appraisal, Market Share
Frequently impacts on Competitive
sales, profits or other perception
measures of success
31. Employers don’t pay wages- they only handle the money.
Product pay wages…. Henry Ford
32. Don’t reduce staff
Ask more from your key people
People are better than you think
34. Vinod Bidwaik
http://vinodtbidwaik.blogspot.com
Vinod Bidwaik is the seasoned HR professional working with DSM India Pvt. Ltd. as the Head-HR for
India operations. He has wide experience in large Indian and Multi-National companies like M & M,
Semperit Group and Sakaal Media Group on senior level positions. He has rich experience in HR and
IR. He has an expertise working on greenfield projects and establishing HR department. He
implemented various HR practices; OD interventions in his organizations. During his tenure with
Semperit, the company was awarded for Best Innovative HR Practices during 2002 by NIPM. He holds
Master degree in Personnel Management, Diploma in Production Management. He is the regular
writer for various management journals like BMA Review, Human Factor and other management
Journals. He is on editorial advisory board of CJMR, Journal of Management Research of CMRD, at
Pune. He writes regular columns in various newspapers on management and development. He is
invited for Guest lectures on specialized subjects by various management and engineering
institutions. He is a life member of Bombay Management Association and holds various honorary
positions in different associations.
Disclaimer: Views expressed here are his own views and do not represent his
organization's (current & past) views.
