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Mak effective cost controls in challenging economic conditions ace final
 

Mak effective cost controls in challenging economic conditions ace final

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Presentation developed and made at a workshop for Senior Executives.

Presentation developed and made at a workshop for Senior Executives.
ACE Consultants were the logistics partners for the workshop.

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    Mak effective cost controls in challenging economic conditions ace final Mak effective cost controls in challenging economic conditions ace final Presentation Transcript

    • Workshop conducted by:Masoud Ali Khan, FCMA December 14, 2010 Organize by: 1
    • 7:31 O Children of Adam! wear your beautiful apparel at ever (Surah Al A’raf – The Heights).   2
    • NormsParticipationAdding ideasListeningNo personal attacksTimeliness - “be here now!”FunCell phones off or on silent mode“Thank you for not smoking”
    • Participants’ Introduction & Expectations Please share with us your: Name Organization Functional tile
    • Hadith-e-Rasool SAW   Hazrat Abu Hurayrah RAA narrated  that the  Prophet SAW said: “If a people arise from the place where they were  sitting without remembering Allah, then they  have arisen from there like a dead ass. On the  day of resurrection, this meeting will be cause of  regret for them.”     (Abu Daúd). 5
    • Today’s CoverageSession I (9 am to 11 am) Economic Conditions Business Goals Concept & Types of CostsTea / Networking (11 am to 11.30 am)Session II (11.30 am to 1 pm) OPEX & CAPEX Inventory Management Budgeting & Standard CostsZohar Prayers & Lunch (1 pm to 2 pm) 6
    • Today’s Coverage Session III (2 pm to 3.30 pm)  Re-engineering of Processes (BPR)  Continuous Process Improvement (CPI)  Quality Management (QM)  Productivity Campaigns / Cost Consciousness Tea / Networking (3.30 pm to 3.45 pm) Session IV (3.45 pm to 5 pm)  Effective Time Management  Performance Reward Systems  Effective Feedback Mechanism   Action Plan Conclusion & Asar Prayers (5 pm) 7
    • Economic ConditionsEconomic conditions specially the Macro-economic  factors impact Business.The recent Global Economic Crisis lead                          to the financial crunch.Loss of Revenues & reduced Consumer buying powers  due to increased Unemployment .Survival of Business – a great Challenge. 8
    • Business GoalsOptimum Profitability – Primary Goal.Best possible Market Share.Sound Financial Position.Reputation & Image.Satisfied / Loyal Customers.Satisfied & Motivated Human Resources.Contribution to the Government.Contribution to the Society. 9
    • Drivers of Profitability Revenue / Income. Price Volume Costs / Expenses Variable Fixed 10
    • Concept of CostsThe term ‘cost’ means the amount of expenses [actual or notional] incurred on or attributable to specified thing or activity.Total cost (TC) is how much money is required to operate at some particular output level. Total cost equals fixed cost plus variable costs (TC = FC + VC). 11
    • Types of Costs Fixed Costs VS Variable Costs Direct VS Indirect Costs Marginal Cost / Incremental Cost Prime Costs Conversion Costs Overheads Opportunity Cost 12
    • Tea / Networking Break 13
    • 14
    • OPEX & CAPEXAn operating expense / expenditure, operational expense / expenditure or OPEX is an ongoing cost for running a product, business, or system.A capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. 15
    • Inventory ManagementInventory management is primarily about specifying the size and placement of stocked goods.Inventory is one of the key items of the Working Capital in the Manufacturing / Trading sector .Proper Inventory management ensures control over: Financial Costs Cost of Obsolescence Holding / Carrying costs Opportunity Cost 16
    • BudgetingA Budget is a list of all planned expenses and revenues. It is a plan for saving and spending.Cost / Expenses Budgets help controlling these by monitoring the Actual VS Budget on regular basis.Budgets help create a Responsible Culture.Zero-Based Budgets play a key role in rationalizing and controlling Expenses and improving the Bottom-line.Realistic Assumptions are extremely important. 17
    • Standard CostsIt is a system of cost accounting which is designed to find out how much should be the cost of a product under the existing conditions.The actual cost can be ascertained only when production is undertaken.The predetermined / Standard cost is compared to the actual cost and a variance between the two enables the management to take necessary corrective measures. 18
    • Zohar Prayers / Lunch 19
    • Re-engineering of Processes – BPR Processes involve Costs – HR, Systems & Space.. Some of the Processes are historical / prevalent as legacies in organizations. At times, management introduces relatively more Processes to ensure higher amount of Controls. Business Process Re-engineering (BPR) is a Rethinking exercise aimed at dramatically improving the Customer Servicing, Work Efficiency & rationalizing Operational Costs. 20
    • Re-engineering of Processes – BPR 21
    • Continuous Process Improvement – CPI CPI means making things better; it is NOT fighting fires. Process Definition lists what happens between the start and end points. It includes all the activities performed by each department, group, or person who are involved in the process. CPI is a regular review of the activities involved in a Process for rationalizing them with an Aim of improving efficiency with adequate Controls and minimum possible Costs. 22
    • Quality Management – QMAll management activities and functions involved in determination of quality policy and its implementation through means such as quality planning and quality assurance (including quality control).Quality in working methods and operations both in producing goods and providing services brings twofold benefits – Customer Satisfaction / Loyalty and Cost rationalization by eliminating waste and reducing errors / rectification of errors. 23
    • Quality Management – QM 24
    • Productivity CampaignsProductivity is generally measured by the ratio of output to input.Running Productivity Campaigns esp., in Manufacturing concerns can lead to significant cost savings e.g., reduction in Labor cost per unit through effective use of time / methods can result in massive Cost savings.Improved turnaround time in Service organizations can result in similar Cost Savings and improved Revenues. 25
    • Cost ConsciousnessPromoting a Cost Conscious Culture across the Organization by propagating the topics of cost understanding, cost containment, cost avoidance and cost reduction.Switching off Lights / Air Conditioners, while leaving the workplace.The 3R Concept – Reduce, Reuse & Recycle. 26
    • Tea / Networking Break 27
    • Effective Time ManagementTime management refers to a range of skills, tools, and techniques used to manage time when accomplishing specific tasks, projects and goals.Prioritizing, Scheduling & Goal setting helps in Effective Time Management.Time is Value; its optimum utilization ensures improved Operating results. 28
    • 29
    • Performance Reward SystemLink Activities to Vision, KPIs & KPRs.Provide reasonable Weight to Organizational Goals of Cost Control and rationalization.When Team Members see Performance Based Rewards, they strive for achieving Goals / Targets. 30
    • Performance Reward System 31
    • Effective Feedback Mechanism An Effective Reporting System provides timely information on Team / Individual performance and achievement of Goals. MIS reports help making timely Decisions. Information must meet the criteria of: Being Relevant Timely & Accurate. 32
    • Action PlanIdentify Costs in your respective Areas / Functions.See which of these Costs are Controllable without adversely affecting Quality / Performance / Productivity.Introduce:  Budgeting & Variance Analysis  Process Reviews / Improvements  Quality Initiatives  Effective MIS / ReportingValue Time – Utilize it Effectively. 33
    • masoudkhan@yahoo.com www.consultace.com 34
    • Asar Prayers 35