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Strategic Cost Management (SCM) - A Re-Vision!!: Prof. Priyanka Acharya
Strategic Cost Management (SCM) - A Re-Vision!!: Prof. Priyanka Acharya
MANAGEMENT (SCM)
- A RE-VISION!!
Prof. Priyanka Acharya
What is SCM?
What is SCM?
Shank and Govindarajan defines strategic cost
management as "the managerial use of cost information
explicitly directed at one or more of the four stages of
strategic management:
(1) formulating strategies
(2) communicating
those strategies throughout the
organization
(3) developing and carrying out tactics to implement the
strategies and
(4) developing and implementing controls to monitor the
success of objectives".
SCM-Concept
Philosophy
Attitude
SCM represents a proactive attitude that all the costs of the products
and services result from management decisions within the company
and with customers and suppliers.
Market orientation
Holistic overview
Anticipatory approach
Continuous
Participation
Cross-functional
Set of Techniques
Strategic Cost
Management
Focus
Internal
External
Perspective
Value-added
Value chain
Cost analysis-way
In term of product,
customer, and function
With a strongly internal
focus
Value added is a key
concept
Cost analysis-objective
Traditional Cost
Management
Strategic Cost
Management
Traditional Cost
Management
Strategic Cost
Management
A single fundamental
cost driver pervades
literature - cost is a
function of volume.
Applied too often only at
the overall firm level.
Object-Resources
Means
By
identifying cost drivers that link resources, activities and cost objects and
using resources efficiently
Focusing resources on the customers
By measuring the cost and performance of resources
By improving the purchasing process
Managing procurement costs
Object-Processes
Means
Object-Products
Means
Cost
Object-Customers
Means
Managing
Competitors
Means
Competitor
Cost Analysis
SESSION 2
2.
3.
4.
5.
6.
7.
Expired
Costs are those which have been used in generating revenue and
benefits have been received immediately.
Broad Classification
Functional
Element
Classification by
Classification
Wise
Cost
Classificatio
Components
Accounting Classification
n
Production Costs
Direct Costs
Direct Material
(Traceable
Costs)
Prime Cost
Works Cost
Cost
Production
Direct Labour
Direct Expenses
Administration
(Common
Expenses
Costs)
Administrative
Costs
Selling
Expenses
&
Dist.
Selling Expenses
Costs
Distribution
Expenses
R & D Cost
Net Profit
R&D Expenses
Net Profit
Net Profit
Net Profit
Make or Buy
Drop or Add
Special Orders
Sell or Process
Cost reduction
This process undertakes the competitive analysis of actual results with This process finds out the substitute by finding new ways or methods.
established norms.
Under this process, the variances are appraised and reported and necessary Under this process necessary steps are taken for further notification in the
course of action will be taken to revise norms, standards etc.
method.
It starts from established cost standards and attempts to keep the costs of It challenges the standards forth-with and attempts to reduce cost on a
operation of a process in line with those standards
continuous basis.
The emphasis is partly on the present costs and largely on future costs.
It has limited applicability to those items of costs for which standards have It is universally applicable. It should be applied to every area of the business.
already been sent.
SESSION 3
What is BPR??
Meaning of BPR
Business Process Re-engineering (BPR) is a continuous process of rethinking, re-assessment, re-design, evaluation of each element of
business process and consequent improvement in structure and
workplace. It takes care of all facets of operation in an organization.
It is more than just business improvising.
Meaning of BPR
Why Re-engineering??
Why Re-engineering??
of market share
New regulation
New competition
New technology in play
Shorter product life
Operation of BPR
Indentify Possible
Project
Determine cost/
benefit for each
alternative
Conduct initial
impact analysis
Define alternative
simulate new
work flow
Implement
Evaluate the
alternatives
available
Analyze process
baseline
information
Update
positioning
models &
information
Visioning
Identify business
processes to be
reengineered
Enterprise-wide engineering
Identifying
Analyze and
measure an
existing process
Analyzing
Redesigning
Evaluate and
select a process
redesign
Process-specific
engineering
Evaluating
Implement the
reengineered
process
Continuous
improvement of
the process
Implementing
Improving
SESSION 4
Costs of Quality
Prevention Cost
Appraisal Cost
Prevention Costs
Design Reviews
Appraisal Costs
Quality audits
Information costs
Repairs
Design Changes
Expediting costs
TQM Benefits
It is a comprehensive process that can bring a company to the forefront of the global market.
For many companies, it is a major cultural change; from 'solving a crisis' to 'not having a crisis'.
The typical 'just do it' approach to business is replaced by clearly defined processes.
Quality should be customer focused and evaluated using customer based standards
The production process and work methods must be designed consciously to achieve quality
conformance.
Quality cannot be inspected into a product. So, make it right the first time and every time
Quality must be monitored to identify problems quickly and correct quality problems
immediately.
The organization must strive for continuous improvement.
Evolution of Quality
System
Contribution Factors
Globalization & increased Competition
Changer Over of Market to Buyers Market
Customer :- Quality Conscious
Need
1987
1994
2000
Quality management
systems - Fundamentals
& vocabulary
Quality
management
systems Guidelines for
performance
improvement
ISO
9000
Measurement
Audits
ISO
9004
ISO
9001
Technical
Reports
ISO
10012
ISO
19011
Guidelines
Quality management
systems - Requirements
measurable
Quality Management
Principles
Customer focus
Leadership
Involvement of people
Process approach
System approach to management
Continual improvement
Factual approach to decision making
Mutually beneficial supplier relationships
The Continuous
Improvement Mechanism
UNSATISFACTORY OUTCOME
WORK IMPROVEMENT TEAM
CAUSE INVESTIGATION
CORRECTIVE ACTION
PREVENTIVE ACTION
REVIEW
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Management
Responsibility
Measurement,
Analysis &
Improvement
Resource
Management
Product
Realization
Output
Product
Value-adding activities
Information flow
ARCHANA
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Key Requirement of
ISO 9001:2008
Quality Manual
Procedure
Instruction,
Guidelines List
Forms, Formats,
Registers
II
III
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