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Cost control and reduction
- 1. Guidance of: Presentedby Prof.Dr.M.V.Nagabhushanam , M.Pharm,Ph.D k.Sudheer Dept. Of PMRA y16mph287 Pmra
- 2. Cost Control Def:- Theprocess of monitoring and regulating the expenditure of funds is know as cost control. In other words , it means to regulate/control the operating costs in a business firm.
- 3. Features of Costcontrol Cost control process involves setting targets and standards, ascertaining the actual performance, comparing the actual performance with standard, investigating the variances and taking corrective action. It aims at achieving the standard. It is a preventive function. In cost control, costs are optimized before they are incurred. It is generally applicable to items which have standards. It contains guidelines and directive management such as, how to do a thing.
- 4. Aspects Of CostControl 1)Planning:- Initially a plan or set of targets is established in the form of budgets and standards. 2)Communication:- The next step is to communicate the plan to those whose responsibility is to implement the plan. 3)Motivation:- Motivation is defined as the process that initiates, guides and maintains goal-oriented behaviors. cont..
- 5. 4)Appraisal and Reporting:-comparison has to be made with the predetermined targets and actual performance. Deficiencies are noted and discussion is started to overcome deficiencies. 5)Decision-making:- Finally, corrective actions and remedial measures are taken or the set of targets are revised, depending upon the administration’s understanding of the problem.
- 6. Main Areas ofcost control Materials Labor Overheads Sales Energy
- 7. Advantages cost control Ithelps the firm to improve its profitability and competitiveness. It helps the firm in reducing its costs and thus reduce its prices. It is indispensable for achieving greater productivity. If the price of the product is stable and reasonable, it can maintain higher sales and thus employment of work force.
- 8. Disadvantages of costcontrol Reduces the flexibility and process improvement in a company. Restriction on innovation. Requirement of skillful personnel to set standards.
- 9. Factors hampering cost controlin India Cost of raw materials and other intermediate products is high. High foreign commodity prices, particularly oil. Power shortages and underutilization of capacity. Delay in the issue of licenses. High rates of taxes tend to raise the overall costs of production in India.
- 10. General techniques of Costcutting Use Skype to make domestic and international phone calls. Establish presence on social media sites such as Facebook and Twitter instead of newspaper, magazine, mail. Use electronic communication, cut down on print and paper communication. Outsource computer maintenance. Lease equipments. Share office or building space with another business.
- 11. Techniques of costcontrol Budgetary control Standard costing Inventory control Ratio analysis Variance analysis
- 12. Cost Reduction Def:-The processof identifying and eliminating unnecessary costs to improve the profitability of a business is know as cost reduction.
- 13. Features of Cost reduction Cost reduction is not concerned with setting targets and standards. Cost reduction is the final result in the cost control process. Cost reduction aims at improving the standards. It is continuous, dynamic and innovative in nature, looking always for measures and alternative to reduce costs. It is a corrective function. This is applicable to every activity of the business. It adds thinking and analysis to action at all levels of management.
- 14. Techniques of costreduction Organization and methods Work study Material handling Automation Value analysis Variety reduction Production control Design Materials control Quality control
- 15. Goals Defined Methodology Identification ofbest vendor/product Efficient and repeatable process Quantitative & qualitative scoring Compliance Address potential vendor challenges Sample Presentation Template to use
- 16. Project Milestones Project Charter Requirements Document (Scope) Business Use Cases VendorShort List RFP Conference Room Pilot Demos & Vendor Scorecard Executive Summary Executive Decision
- 17. Project Timeline (weeks) Project Charter Require- ments Document (Scope) Business UseCases Vendor Short List RFP Demos & Vendor Scorecard Executive Summary Executive Decision
- 18. Requirements Document Weighting Must Have (4) Important (2) Desirable (1) Very Important (3) 4= Must Have Without this requirement the system will not be considered for evaluation. 3 = Very Important It would be extremely difficult to function without this feature. 2 = Important This feature should be included. Can function without this feature but it will have a negative affect on performance. 1 = Desirable Although this feature is beneficial, its absence will not significantly degrade the system but its presence will improve efficiency.
- 19. Vendor Scorecard Exceptional =1.0 Meets Requirements Well = 0.75 Minimal Requirements = 0.50 Meets Partial Requirements =0.25 Does Not Meet Requirements = 0
- 20. Vendor Scorecard Grades EvaluationScore Description Exceptional 1.00 Exceeds basic needs and provides significant additional useful value and potential Meets Requirements Well 0.75 The system compares well with competitors, meets all essential needs and gives all that’s needed Meets Minimal Requirements Only 0.50 System does not compare well to best performers in this category, but still does enough to be useful Meets Partial Requirements 0.25 The system does not meet all necessary requirements in this area, but does contribute some partial value Does Not Meet Requirements 0.00 The system does not meet any of the basic requirements at all
- 21. Cost vs. Functionality(sample) Estimated1stYearCost $0k $50k $100 $150k $200K 40 70 100 Percentage of Requirements Met Vendor CC Vendor B A Vendor A B