Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Mak effective cost controls in challenging economic conditions ace final


Published on

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

  • Be the first to comment

Mak effective cost controls in challenging economic conditions ace final

  1. 1. Workshop conducted by:Masoud Ali Khan, FCMA December 14, 2010 Organize by: 1
  2. 2. 7:31 O Children of Adam! wear your beautiful apparel at ever (Surah Al A’raf – The Heights).   2
  3. 3. NormsParticipationAdding ideasListeningNo personal attacksTimeliness - “be here now!”FunCell phones off or on silent mode“Thank you for not smoking”
  4. 4. Participants’ Introduction & Expectations Please share with us your: Name Organization Functional tile
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. Drivers of Profitability Revenue / Income. Price Volume Costs / Expenses Variable Fixed 10
  11. 11. 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
  12. 12. Types of Costs Fixed Costs VS Variable Costs Direct VS Indirect Costs Marginal Cost / Incremental Cost Prime Costs Conversion Costs Overheads Opportunity Cost 12
  13. 13. Tea / Networking Break 13
  14. 14. 14
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. Zohar Prayers / Lunch 19
  20. 20. 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
  21. 21. Re-engineering of Processes – BPR 21
  22. 22. 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
  23. 23. 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
  24. 24. Quality Management – QM 24
  25. 25. 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
  26. 26. 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
  27. 27. Tea / Networking Break 27
  28. 28. 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. 29. 29
  30. 30. 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
  31. 31. Performance Reward System 31
  32. 32. 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
  33. 33. 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
  34. 34. 34
  35. 35. Asar Prayers 35