Cost reduction (In-House)

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

10 Course summary - developing your own cost action plan

• Group and individual action plans will be prepared with a view to participants identifying their cost risks areas and the techniques which can be immediately applied to improve costing and reduce costs