Successful cost reduction

Course details

• Being aware of costs at all times
• Seeking cost reduction from the start (including life-cycle costing)
• Appraising projects / production to identify and take out risk
• Understanding real budgeting
• Using techniques such as ZBB and ABC where appropriate
• Ensuring cost reports lead to action
• Managing a cost reduction process that delivers

1. Introduction – the cost management process
   • The risks of poor cost control
   • Capital and revenue costs
   • The importance of cost awareness
   • The importance of cost reduction
   • Cost management – the key aspects
   • How to build a cost management and control process checklist for your areas of responsibility
2. Cost removal – taking out costs
   • Cost awareness
   • Costs of poor design / poor processes
   • Value engineering
   • Removing redundant costs
3. The need for commercial, technical and financial appraisals
   • Understand the problems before cash is committed and costs incurred
   • Making the effort to identify commercial and technical risk
   • The time value of money – DCF techniques for long term projects
   • Cost models for production processes and projects
   • Costing models – project appraisals
   • The use of spreadsheets to identify sensitivity and risk
   • How to focus on risk management
4. Budgeting – proper budgeting challenges costs
   • The philosophy of the business – are costs an issue?
   • The importance of having the right culture
   • The need for detailed business objectives
   • Budgetary control measures
   • Designing budget reports – for action
5. Zero-based budgeting (ZBB) – the principles
   • Much more than starting with a clean sheet of paper
   • What ZBB can achieve
   • The concept of decision packages – to challenge business methods and costs
   • Only necessary costs should be incurred
   • A review of an operating budget – demonstrating what ZBB challenges and the costs it may lead to being taken out
6. Awareness of overheads and other costs
   • Definitions of cost – direct and indirect
   • Dealing with overheads – what is meant by allocation, absorption or apportionment?
   • The apparent and real problems with overheads
   • Different ways of dealing with overheads
   • Review of overhead allocation methods and accounting and reporting issues
7. Overheads and product costing
   • Activity-based costing (ABC) – the principles
   • Where and how the ABC approach may be helpful
   • Know the ‘true’ cost of a product or a project
   • Should you be in business? Will you stay in business?
   • Identifying weaknesses in a traditional overhead allocation
   • How ABC will help improve product or service costing
   • Identifying which products and activities should be developed and which abandoned
8. Cost reduction culture
   • The need for cost reports
   • What measures can be used to identify over-spends as early as possible
   • Cost control performance measures and ratios
9. Design of cost control reports
   • Reports should lead to action and deliver
   • Selecting cost control measures which can be acted upon
   • Practice in designing action reports