Product cost analysis icwa + c.com.

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Product cost analysis icwa + c.com.

  1. 1. Product Cost Analysis Pavan Kumar Vijay President, the ICSI
  2. 2. The Key Developments Effecting Costing Decisions <ul><li>Technological Advances </li></ul><ul><li>Globalisation – WTO and Free Economies </li></ul><ul><li>Changing Focus from Production to Customer – Going back to Mahatma Gandhi School of Thought </li></ul><ul><li>Changing Organisational Structures </li></ul><ul><li>Social, Political and Cultural Changes </li></ul><ul><li>Corporate Governance and Rethinking Ethics </li></ul>
  3. 3. Corporate Governance and Ethics <ul><li>Creditability and Trust lead to Customer Loyalty - People prefer trusted products and companies </li></ul><ul><li>Transparency in Costing - leading to development of industry best practices </li></ul><ul><li>The Cost of Capital is lowest for well governed companies (Mckinsey Survey) </li></ul><ul><li>Wealth Sharing leads to growing society - thus increasing market demand and economy of scales </li></ul><ul><li>Reduction is Wastage saves costs as well as Natural Resources </li></ul>
  4. 4. Strategic Costing Decisions <ul><li>SWOT Analysis </li></ul><ul><li>Identifying Critical Success Factors </li></ul><ul><li>Value Chain Analysis </li></ul><ul><li>Cost of Adhering and Not Adhering Ethics </li></ul><ul><li>Use of Appropriate Tool to Analyse Costs </li></ul><ul><li>Assumptions to be made in Product Costing </li></ul>
  5. 5. Developments in Cost Analysis <ul><li>QCT Based Decisions – Quality, Cost and Time </li></ul><ul><li>Life Cycle Costing – Analyse the costs of activities that occur over the life cycle of the product </li></ul><ul><li>Target Costing than Cost Plus Costing – Target Costing is the product cost that must be achieved for a product to be viable in the long term </li></ul><ul><li>Activity Based Costing/ Management - analysing activities, cost drivers and performance so that customer value and profitability are improved </li></ul>
  6. 6. Developments in Cost Analysis … Contd. <ul><li>Value Engineering –an organized approach to the identification and elimination of unnecessary cost </li></ul><ul><li>Business Process Reengineering – Fundamental rethinking and redesign of critical processes </li></ul><ul><li>Increasing Importance to Quality Costs – </li></ul><ul><ul><li>Prevention Costs </li></ul></ul><ul><ul><li>Quality Control Costs </li></ul></ul><ul><ul><li>Cost of Poor Quality </li></ul></ul><ul><li>Risk Management and Pricing </li></ul>
  7. 7. The Costing Strategy <ul><li>No single method is used in ISOLATION to analyse costs </li></ul><ul><li>There is always possibility to reduce costs and add value, so continue research </li></ul><ul><li>Involve employees at all levels in generating more ideas to reduce cost </li></ul><ul><li>Knowledge Management is key to reducing costs </li></ul><ul><li>Ethics pay in long run so be transparent and accountable </li></ul>
  8. 8. The Role of Professionals - CS, CWA and CA <ul><li>Company Secretaries </li></ul><ul><li>Corporate Governance </li></ul><ul><li>Corporate and Securities Laws </li></ul><ul><li>Secretarial Audit </li></ul><ul><li>Cost Accountants </li></ul><ul><li>Cost Management </li></ul><ul><li>Cost Accounting </li></ul><ul><li>Cost Audit </li></ul><ul><li>Chartered Accountants </li></ul><ul><li>Financial Management and Accounts </li></ul><ul><li>Taxation Laws </li></ul><ul><li>Financial Audit </li></ul>
  9. 9. For Strong Corporate Citizenry is The Company Secretary
  10. 10. Company Secretary is Vital Link CS BOARD MEMBERS SOCIETY LENDERS REGULATOR EMPLOYEES INDUSTRY SUPPLIERS GOVT CUSTOMERS
  11. 11. Company Secretary at Centre Stage Company Secretary CORPORATE COMMUNICATION STRATEGY SECRETARIAL AND LEGAL FINANCIAL HRM INFORMATION TECHNOLOGY MARKETING R&D AND PRODUCTION
  12. 12. Company Secretaries and Product Cost Analysis <ul><li>Company Secretaries specialise in corporate governance, legal and ethical dimension of Product Costing </li></ul><ul><li>Company Secretaries advice Board on Strategic Costing Decisions due of multi-disciplinary Knowledge </li></ul><ul><li>Being Secretary to the Board and Audit Committee company Secretary consolidates all information and takes necessary approvals </li></ul><ul><li>Company Secretaries have access to confidential information that may be critical for Product Costing </li></ul>
  13. 13. The Future Ahead <ul><li>Survival of the Fittest is punch line </li></ul><ul><li>The WTO – Opportunities and Challenges Ahead </li></ul><ul><li>Customer is more educated and demanding than ever </li></ul><ul><li>No Compromise on Quality and Ethics </li></ul><ul><li>Shift from ‘ Divide and Rule’ to ‘ Unite and Rule’ </li></ul><ul><li>Tough time ahead for Small Consulting Firms of CSs, CWAs, CAs and Lawyers – few takers for their limited expertise </li></ul>
  14. 14. Globalisation of Professional Services Beyond Borders Borders
  15. 15. YEAR 2005 Opening of the Services Sector Under WTO
  16. 16. Pessimism Threat of Invasion of Service Sector by 145 Member Countries of WTO in India
  17. 17. Threat Threat Threat Threat
  18. 18. Optimism Opportunity to Invade Service Sector of 145 Member Countries of WTO by India
  19. 19. Opportunities Opportunities Opportunities Opportunities
  20. 20. YEAR 2015
  21. 21. We will see Global Business Law (GBL) Global Corporate Governance Standards (GCGS) Global Accounting Standards (GAS) Freedom from Economic Boundaries Global Cost Accounting Standards (GCAS)
  22. 22. Global Benefits <ul><li>Access to Global Markets </li></ul><ul><li>Access to Global Suppliers </li></ul><ul><li>Access to Global Financial Resources </li></ul><ul><li>Access to Global Manpower </li></ul><ul><li>Access to Global Best Practices </li></ul><ul><li>Access to Global Research </li></ul>
  23. 23. Global Challenges <ul><li>Quality of Service with Time Commitment </li></ul><ul><li>International Operational Infrastructure </li></ul><ul><li>High degree of competition among professionals </li></ul><ul><li>Enhanced responsibility towards international community </li></ul><ul><li>International language and cross-cultural issues </li></ul><ul><li>Key Relationships in Foreign Countries </li></ul>
  24. 24. <ul><li>Coming Together is Beginning </li></ul><ul><li>Meeting Together is Progress </li></ul><ul><li>and </li></ul><ul><li>Working Together is Success </li></ul>Henry Ford
  25. 25. <ul><li>Success can be achieved globally by synergising on core competencies i.e </li></ul>Brand Knowledge <ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Capital </li></ul></ul>
  26. 26. Think C-Commerce i.e Collaborative Commerce How about CS, CA, CWA, Lawyers, MBA and IT professionals coming together to create multinational mega firms ?
  27. 27. Corporate Laws Economic Laws Taxation Laws WTO & IPR International Trade Law IT & BPO Management Consulting Quality of Service Finance and Accounting Commerce Brand Synergy Infrastructure Synergy Capital Synergy Collaborative Consulting Model Single Window Interface Knowledge Synergy Global Presence Growing Revenues Growing Customers Growing Nations CS + CA + CWA + LLB + IT + MBA
  28. 28. Multinational Mega Firms <ul><li>Global Reach of Professionals </li></ul><ul><li>Wider Area of Expertise </li></ul><ul><li>Active Networking and Public Relations </li></ul><ul><li>Global Infrastructure Sharing </li></ul><ul><li>Best Practices/ Expertise in Management of Firm </li></ul>
  29. 29. Speed of Service Delivery Quality of Service Make Global Brands Effective Customer Relationship Global Presence Big Size of Firm Ethics
  30. 30. <ul><li>Let Us Come Together </li></ul><ul><li>to </li></ul><ul><li>Grow Together </li></ul>THANK YOU

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