UNDERSTANDING IMPACT OF COST CUTTING AND THE COST OF THAT IMPACT
“COST CUTTING is the achievement of real and permanent reductions in the unit cost of the goods manufactured, or services rendered without impassing their stability for the use that is intended.” -ICWA London-
Cost reduction can be done by reducing the cost per unit, or by increasing productivity. The process of reducing costs is as follows:
1. Compile business expense statements
2. Analyze operating expenses
3 Present recommendations for identified cost savings and expense reduction
4. Implement cost reduction and analysis recommendations
Cost reduction programs may require a bulk amount of research and development budget, but once a new technique is introduced,
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Cost Reduction is a technique used to save the unit cost of the product without compromising with its quality.
Focuses on minimization of wastage Focuses on minimization of cost through new production process, improved plant layout and scientific material handling
Cost control is routinely applied on a continuous basis. Cost reduction is applied when an opportunity for cost reduction arises which offers advantage for a longer time.
Cost control heavily relies on accounting techniques. Cost reduction may not involve the use of accounting technique.
Cost control is operated through setting standards or targets and comparing actual performance therewith, Cost reduction is a continuous process of critical cost examination, analysis and challenge of standards.
Takes corrective action in order to ensure that future performance conforms to standards or norms Each aspect of business products, process, procedures, methods, organization personnel is critically examined and reviewed with a view of improving efficiency and effectiveness and reducing the
guaranteeing that IT conveys the guaranteed benefits irrespective of methodology, focusing on streamlining costs and demonstrating its characteristic
Cost management plays a major role when maintaining profit margins. Management must be able to find in which areas of a business costs must be reduced and the consequences that such reductions have in the overall company. In some situations management must change the way the work is being done in order to decrease costs while in other cases changing one supplier for another might be enough, in both situations a tradeoff will occur and the consequences will impact the company as a whole.
Cost cutting, discontinuation of product or services ,technological changes, and consolidation due to mergers and acquisitions are commonly legal ac...
* Encourage administrative simplification (in the form of digitalization of information) to help reduce costs.
Problem solving becomes systematic and horizontal as discussed in the process oriented section of the previous week (Taylor, 2013). Problem solving becomes preventative instead of reactive. The delivery of products and services are value driven and customer focused. The elimination of non-value added activities and waste improve the quality of products and services. Using a pull system reduces costs because of low inventories, using a JIT methodology (Russell & Taylor, 2011). Continuous improvement should be pursued, improving the quality of products and services to customer.
• Deer adjusted its level of operations downward, cut costs where possible, increased emphasis on pushing decision making downward and restructured manufacturing processes.
Their ability to distribute the cut rate from their operating proficiencies in supply chain management and cash flow, permits them to offers items at discounted rate and a lower price than their competitors. For Costco the meaning of being the low-cost provider while also differentiating from the competitors is ambiguous at best. Costco’s CEO, Jim Sinegal, is certain that low priced, and the high value merchandises are exactly what is needed maintain and achieve a staying power in the industry. Costco also entices their customers with low prices on designated set apart products available only at their stores. Within these designated products, Costco provides a limited selection of nationwide brand-named merchandises in some wide categories. Their approach comprises of selling a limited number of items, keep their costs down, maintain a high volume, compensate employees well, ensure that customers buy their memberships, and target upscale small-business owners through their business only
The desired outcomes from cost reductions, such as reducing the workforce by almost half and eliminating management bonuses, are to reduce cost of goods and increase operating income. Although Harnischfeger’s cost of sales (COS) has increased from 1983 to 1984, the company appears to have reduced COS in comparison to sales from 81% to 79%. In addition, it has increased its Operating Income from $62 million in 1983 to $90 million in 1984.
As “5.1 Cut Costs & Reduce Prices” results in both increased profits and increased market
In this era of high competition, traditional budgeting approaches doesn’t encourage innovation among the employees instead are focused on reduction in costs.(Player, 2003).
Reducing risk ; reducing the quantity of manufactured so that reducing burden of stock and burden of frequent discount sales
As such, there is material cost regulator, manufacturing control, labor cost regulator, excellence control and so on. Conversely, control over the price is implemented through the methods of financial control and typical costing (Meigs, 1998). The control methods aid the management in understanding the operating competence of a firm. Cost accounting also determines the selling price. The intention of all business firms is minimizing costs and maximizing profits. The costs incurred in producing goods and services may be reduced through incorporating alternate but cheaper resources of
Cost optimization: Determine the product costs by tracing detailed cost using analytical tools. To maximize profit by detect precise cost of products, optimize margins by inventory valuation.
Product designing, in this stage for continuous quality improvement the parameters of the design gets changed and the level of tolerance gets altered. This is very difficult for the manufacturing companies in implementation stage.