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Strategic cost management concepts, methods and applications


Strategic cost management concepts, methods and applications 2001-08-30 conditions in response to economic globalization, the increasingly fierce competitive situation, and improving the long-term competitive strength, strategic management theory Rise and methods. It breaks through the traditional management of the Thinking deeply influenced the decision support system as an enterprise management accounting, cost management is no exception, from a strategic point of view to study the formation and control the cost of the strategic cost management (strategiccostmanagement, SCM) came into being. This paper will SCM ideas and concepts, under the guidance of this concept in the set of methods and how these concepts and methods of effective implementation of enterprise issues such as more comprehensive discussion. A strategic cost management (SCM) the concept of two prominent American professors of accounting academics Cooper (Cooper) and Si Lamo was (Slagmulderr) of the SCM has been condensed as follows define: SCM refers to the use of a range of enterprise cost management methods to reduce costs while achieving and strengthening strategic position (improvethestrategicpositionofafirm) purposes [1]. Comprehensive ideas of today's SCM and methods, I believe that with the traditional cost management has the following characteristics compared to at least: l. The purpose of cost management changes in the purpose of SCM is not only to reduce costs, more importantly, to establish and maintain long-term competitive advantages of enterprises. That companies must seek to improve (or not damaged) to reduce the cost of its competitive position means. If a lower cost way to weaken the strategic position of the enterprise should be abandoned; the other hand, if a cost increase will help to increase the competitive strength, then the cost increases are to be encouraged. If a segment of customers on the need for a special after-sales service, although this approach will increase the cost of doing business, but it has attracted customers to maintain a competitive advantage in the long run more good than harm; course Enterprises can also be recycled through the project (reengineerin) to reorganize the business processes to achieve the same time reducing costs and enhancing the competitive position of the goal. Such as a hospital by streamlining procedures to reduce the cost of treatment, and after trying to make the treatment process redesign will help reduce the patient's psychological stress. This initiative led to increased hospital customers, strategic position strengthened. 2. Cost management to expand the scope of SCM is a comprehensive, multi-angle, breaking the boundaries of the cost management business. First, because the cost structure of today's enterprises, the proportion of the costs of prenatal and postnatal gradual increase in its cost management should not remain in the production process, cost control, but should focus on prenatal cost of product design and material procurement, and post- product marketing and customer use of cost control. So deep into the corporate R & D SCM, supply, production, marketing and after-sales service department, a comprehensive, detailed analysis and control of various departments within and between departments (intra-organizational) costs associated with each other. Second, the scope of strategic cost management is not limited to the enterprise, but also beyond the enterprise across organizational boundaries (inter-organiza-tional) cost management, and enterprise value chain, such as upstream (supplier) and downstream (distributors) enterprise establish an electronic data information exchange system (EDI), transportation systems in time, the cost of coordination to carry out improvements. It is noteworthy that, in today's global economic integration, under the conditions of enterprise cost management should not be limited to domestic and reconstruction of enterprises in the global value chain, to obtain the combined advantages of the global economy. Finally, enterprises should also be external (extra-organizational) speculated that rival the cost of information and analysis, in comparison with each other to find the gap between the cost of the enterprise, the cost of remodeling business and competitive advantage. 3. Shift the focus of cost management cost management focuses on the traditional cost savings (costreduction), which sought only in the production process does not consume unnecessary costs and improve working methods in order to save the costs of this will happen, it is expressed as the cost of improvement Reduce scrap loss, and saving energy consumption, zero inventory. Operation analysis and improvement mused among them. The SCM focuses on cost avoidance (costavoidance), based on prevention. Planning when conducting business on the business location, market position, scale and other characteristics of a series of cost drivers for the Origin comprehensive consideration to the cost from the source to control the occurrence. In addition, product design and development phase, in order to avoid the occurrence of the cost, try to design requirements to meet the target cost, and competitive products. 4. Cost management method to update the strategic management due to the impact of the ideas and methods, SCM's approach is different from the traditional cost management methods. As for exactly what SCM approach, different opinions in the literature at home and abroad. The author believes that the acquisition of SCM in order to achieve long-term competitive advantage of corporate purpose, from the following two levels of innovation and choice of method to achieve this purpose: one is the strategic cost planning (strategiccosting) level, designed to help enterprises prior cost planning and control, fundamentally improve its long-term profitability. The main methods for this level from the strategic management of value chain analysis, and cost targets for the development of the product life-cycle costing, target costing method. The other is the business improvement (operationalimprovement) level, to improve the efficiency of its daily business activities, the implementation of cost planning and continue to improve enterprise competitiveness. Methods of keeping with this idea of ​​the cost analysis and competitor benchmarking system (benchmarking), cost driver analysis method. Of course, this distinction can not be as clear as the knife. In fact, the cost advantage for companies in the process, these two aspects complement each other, but these methods are also integrated and consolidated together. Second, strategic cost management (a) the value of health (value-chain) analysis this way by the Harvard Business School professor Michael Porter first proposed. Here is the value of the buyer is willing to provide their products to the price paid, the value of activities undertaken by the enterprise and technical material on the activities of distinct boundaries. Porter will be divided into basic activities and support activities into two categories: the former, such as internal logistics, production operations, etc., the latter, such as procurement, human resources management, the two can be further divided into a number of specific activities significantly different [3] . VC is a series of links connected by a variety of the value of the interdependence of the activities of collection. That is, VC is not a collection of independent activities, but interdependent activities constitute a system [4]. In this system, contact between the various activities that an activity affects other activities carried out by way of cost and efficiency. Porter will be divided into internal linkages and vertical linkages (VC companies and suppliers, the buyer and the link between purchasing and marketing channels VC) two categories [5]. Study links common means that only one activity alone can not fully understand the cost of the state of this activity, while interrelated activities in order to reduce the total cost of creating opportunities, businesses can contact them through the coordination or optimization to create the overall cost advantage. 1. Identification and optimization of corporate VC VC's internal contact within the contact is reflected in the basic activities of supporting activities and between the actual procurement of purchased inputs such as quality and production costs, inspection costs and product quality. More links between the activities reflected in the various basic, such as strengthening the inspection of the input components will reduce the production process behind quality assurance costs. 2. VC identification and coordination of the vertical linkages that exist in the same contact within the industry to provide consumers with some sort of final products or services between related enterprises. Upstream and downstream and channel characteristics of the company's products or services, and other VC and business connections to very significant impact on business costs. Suppliers of products such as appropriate packaging to reduce transportation costs of the enterprise, and to improve the VC of the vertical linkages, will enable enterprises and their upstream and downstream businesses and channels together to reduce costs, improve their overall competitive advantage related businesses. Such as Xerox Corporation (Xerox) to suppliers through computer terminals to provide its production schedule so that suppliers of components shipped in time, so that both can reduce inventory costs. Identify and pursue such opportunities, the need for suppliers, buyers, and purchasing and marketing channels of the VC were carefully studied. 3. Reconstruction of contact in all types of VC-depth analysis based on the changes in the competitive environment in which industries, enterprises can the adaptive reconstruction of their VC. Such as by changing the product mix, process, service mode and range of services, re-select VC of the upstream and downstream channels or adjust them with the purchase and sale of contact between the VC and other ways to cut and re-build, to fundamentally change its cost position and enhance its core competitiveness. (B) of the product life cycle cost (productlifeCycleCost) Act operators from the production point of view, the product life cycle means the product from This process includes the following five stages [6]: (1) product research and initial design; (2) product development and testing; (3) production; (4) sales; (5) customers. Products in the five stages that occurred in all product life-cycle cost-consuming. In recent years, increasing emphasis on the environment, the experts believe should be abandoned after the product caused the environmental impact of the cost of the products discarded into account in order to more fully reflect the life-cycle costs. Of the product life cycle cost of a comprehensive measurement and analysis has three purposes: first, to help companies to better calculate the full costs of products, easy-to-market enterprises in the prior forecasts overall cost-effectiveness do to determine the viability of the product development. Second, to help enterprises under various stages of product life cycle, the distribution of costs to ensure cost control after the main stage. Product research and development and design SCM has become a focus of attention. Not only because of the high cost of developing the design itself, but also because design is determined, the associated costs lead to lock (locked-incost). According to expert estimates, the products identified in this stage the cost of the proportion of the total cost of between 75% -90% , little room for cost reduction. Third, the cost of expanding the understanding of the scope of benefit in the product design stage to consider the cost of customer use and product abandoned in order to more effectively manage these costs. (c ) target cost planning method (TargetCosting) how to improve product and process design, to meet market demand and expected profitability of enterprises under the premise of reducing the design phase is about 80% of locked product cost? 20th century 60's invented by the Japanese Toyota Motor Corporation's goal of cost planning method can undertake this important task. This approach to improve Japan's industrial enterprises (especially the automobile industry) economic and competitive strength, contribute significantly. 80 years, this methods have been many famous European and American companies (such as Ford) have been used, which greatly improved its cost and financial position. target cost is the development of enterprises in the new product design process, in order to achieve the target profit and must meet the cost target, that is, product life cycle cost with a maximum cost allowed value. target cost planning method is the core work of the cost of setting goals, and through a variety of ways to improve products and processes continue to design, product design to the final cost of making less than or equal to the target cost . The need for the work, including marketing. development and design, procurement, engineering, finance and accounting and even suppliers and customers, including the design team or working group to carry out. the main operation is as follows: 1. to develop target cost price of a target because the target cost for a target profit, so the price must first set goals, it needs to conduct market research, forecasting the current and future market needs of product and its main function, demand, consumers are willing to pay the price should also be aware of product features and price competition. Then, according to business objectives and long-term profit plan, and consider the return on investment and cash flow expectations and other factors to determine the target profit (rate), this market-driven (market a driven) of the target cost to be determined. 2. improve the design to meet the cost of the product target cost goal is established, can be associated with the company's current product cost comparison to determine the cost difference. And the gap is reduce the cost of the design team goals, but also the cost pressures they face. the design team can put this gap is decomposed from different angles, such as decomposed into various cost elements (raw materials, parts, labor, etc.) or the cost of some features gap, in accordance with the various departments within the design team (including parts suppliers) to break down, so that cost pressures have been able to allocate and transfer, and to achieve cost reduction targets specified in specific ways. Then, the design team may use Quality Function decomposition (QFD), value engineering method (VE), re-engineering and other methods to find the products and processes meet the requirements of design. QFD to identify customer needs, and comparative analysis with the design team plans to meet the demand gap, to support VE engineering design process. VE is a kind of evaluation and improvement of design, a systematic approach to improve product value can be achieved through the following cost reduction objectives in two ways: first, to ensure product function under the premise of reducing its zero component costs and manufacturing costs; Second, by cutting unnecessary product features to reduce costs. recycling project has been designed by an existing process or re-design to further reduce costs. (d ) competitor cost analysis and standard rate system (Benchmarking) the cost of conducting competitor analysis, you must first learn a lot from the various sources of information related to the preliminary estimate of the cost of competitors indicators, such as looking for a rival suppliers, and provide them with the cost of parts; analysis of competitors labor costs and efficiency; assess the assets of the state and its competitors, ability to use and so on. can be demolished analysis (tear-downanalysis) will compete broken down into parts rival products in order to identify the product's features and design characteristics, infer the production process, understanding of product cost. In addition to other information must adjust according to opponents above estimate indicators, such as competitors, current and future strategies and resulting changes in the cost level, new trends in business environment and industry in the behavior of potential entrants. When the cost structure of competitors has been determined acceptable estimates, the company can use this information as a measure of its own cost cost performance of the benchmark (benchmark), that the objectives and scale as to be systematic, structured learning and beyond. This analysis method provides the best performance of the company and between the present and future cost difference reflect the Company's relative position, and points out specific targets for improvement and ways to cut costs while allowing companies to improve product and process characteristics, strategic position has been strengthened. (e) cost drivers (COstDriver) analysis 20 since the late 80s, well-known accounting professor from the United States advocated by Kaplan and other job costing (ABC), in the United States, Canada, many of the successful application of advanced manufacturing enterprises found that the cost of this method not only solves the distortion problem, and it provides relevant information (such as resource consumption of the operating conditions, the corresponding number of cost drivers and so on) for the cost analysis and control of enterprises laid a good basis. Although the cost driver (ie, the causes and the driving force of cost) is the ABC's core concept, but does not belong to ABC mode. because of the height from the SCM point of view, cost drivers include not only the mode of operation of enterprises expanded the concept, the implementation of the micro-level cost drivers, but also the overall cost position deciding the structural cost driver. analysis of these two levels of cost drivers, can help enterprises to fully grasp the cost of dynamic and effective way to explore to get the cost advantage. 1. implementation of cost driver analysis, including production and business activities of each operation carried out by the motivation and resources to Motivation. job motivation is to contribute to the final product operation mode and causes, such as Purchase activity driver is to send purchase order number. can be analyzed and the final output of the activity driver links to determine the value of the job: the final product required for the production and operation can not be replaced or the value of the final product provides a unique Operating as a value-added operations; the other hand, for the non-value-added operations. general corporate purchases of processing, assembly and so are the value-added operations, and most of the storage, handling, inspection, and supply, production and marketing aspects of waiting and delays, and increase output since the end of the value of non-value-added operations, should be reduced until eliminated in order to ensure the output value of the product cost can be reduced under the premise. resources, motivation refers to the resources consumed by the job the way and the reason, it is the cost of the resources allocated to the fundamental basis for operation. If purchase is motivated by the job resource number of employees engaged in this activity. Analysis of the Motivation of resources, is conducive to reflect and improve operating efficiency (operating capacity / resource costs ). in determining the operating efficiency level, can be the enterprise's operations and the industry similar to the operation were compared, and then through the resource Motivation analysis and control, seeking to improve operational efficiency and effective way, with particular attention to analysis and control of total costs occupy a significant portion or percentage of the value of activity is gradually increasing motivation resources. If work by reducing the number of reduced operating time, improve equipment utilization and other measures to reduce resource consumption and improve operating efficiency and reduce product cost. 2. structural cost driver analysis when we view from the specific activities to corporate enterprises as a whole, they will find that most of the cost of doing business in their specific production and business activities had been determined before the commencement of this part of the cost factors said that the structural cost drivers. Porter that affect the value of the activities of dozens of structural cost drivers (ie cost drivers) are: economies of scale and learning. capacity utilization model, contact, relationship, integration, timing and independent policy, geographical location and institutional factors'''. deeper structural cost drivers affect cost up position. such as industrial policy, the scale is moderate, the choice of site, on the market positioning, technology and product portfolio decisions etc., will determine its cost position for long. In order to create long-term cost advantage should be more effective than the competition to control such cost drivers. such as the U.S. Southwest to deal with the fierce competition, positioning its service rather than a specific route comprehensive short flight routes to avoid the major airports in the business, to take to cancel dinner, reservation and other special services, and the establishment of automatic ticketing system and other measures to reduce costs. The results of many of its daily flights and sent a low price to attract a large number of short-term travelers, cost leadership can be established. 3. Although the interaction of cost drivers may be a certain cost drivers of the value of the Cost of a class have the greatest impact, but a number of cost drivers often interact to determine the cost. This interaction takes two forms: mutual strengthening or against each other. If economies of scale or learning effects can strengthen enterprise's advantage in the timing, cost advantages of vertical integration may also be offset by the underutilization of production capacity . Therefore, enterprises should also pay attention to analyze the interaction between the cost drivers in order to avoid conflicting between cost drivers and to make full use of cost drivers between the mutually reinforcing effects to obtain sustainable competitive advantage. three , SCM application of the method ideas and methods of the SCM, in our current business management practices used not by much. highly praised China's Handan Iron and Steel business, market, cost control standards and decomposed into place full of these rare, but the substance remains the standard cost system improved [9], but not with the sense of a target cost of SCM plans in advance because it did not, and to target cost based product and process design. Yaxing Group's purchase and sale price ratio management, mainly outside of the manufacturing process of enterprise procurement costs and sales prices and effective control system, but also has nothing to do with SCM. Of course, China's home appliance industry, many companies because competition intense, has been the spark of thought flashed SCM. such as Haier refrigerator concern in the product design stage life cycle cost, and customer use of cost and environmental costs be considered as an important factor in the development to meet U.S. EPA 2001 and new energy-efficient environmental standards of the products [10]. but in general, SCM concept of community is not universal in practice, the method does not use the system. In order to make our cost effectiveness of management practices on the basis of the existing to a higher level to to address today's global economic integration under the conditions of intense competitive situation, companies should implement SCM, introduction, absorption and innovation SCM approach. To do this in the following three aspects should be doing something to make SCM smoothly and achieve results. 1. to take appropriate ways and means, into a comprehensive concept of enterprise SCM through consulting, learning, training, publicity and other means so that all personnel are aware of the importance of SCM, and strengthen cost concepts and cost-consciousness, which is prerequisite to play a role in SCM. In particular, enterprises should be the training of senior management and accounting personnel, because the success of SCM is not just rely on the grassroots sector, energy saving, more importantly, by the vision of senior management and the implementation of cost-conscious approach SCM perseverance. In addition, the majority of our business for little or no full-time status of personnel management accounting, business management accounting positions should be set, the selection of management accounting expertise with staff. They can not only provide information, evaluation programs, planning, assessment results, and the right to fulfill its responsibilities to the SCM will play the role of organization and coordination. 2. the introduction of advanced information technology to improve the organizational structure of SCM to obtain the information they need to ensure that information technology and organization technology on the one hand the use of SCM's approach more fully, more effectively, such as the use of information technology will enable the VC analysis of the linkages between various activities, break area, personnel and information constraints are fully tap and use of ; the other hand, only the use of advanced information technology to a large number of SCM required to analyze and process the information at any time. In addition, enterprises should conform to the trend of flat organization, focusing on communication and cooperation, and effective incentive mechanism as a basis for the design of a learning organization, the formation of a dynamic project team, so that all departments and personnel involved in the SCM can be coordinated and effective manner. 3. improve the accounting information system, to obtain the information they need to support SCM SCM The information required is different from the existing financial accounting information, and also different from the existing management accounting information. In order to smooth the way, the existing projects and cost elements of cost to provide the cost information must be refreshed (overheads and external people share skills, especially) to match with the value activities,[link widoczny dla zalogowanych], and fully and correctly reflect the products have been consumed, not consumption or expected to be consumed resources. If the cost of the existing criteria, including corporate unused production capacity (depreciation) The SCM is required to the consumption of resources from the reaction products have been removed cost information. In addition, companies must develop sources of information channels, to provide SCM required upstream and downstream channels of corporate and external competitors and the cost and other information, such as The enterprise product development planning. Since SCM involves a wide range, the required amount of information, and shall at any time for analysis and processing, which requires enterprises should rely on advanced information technology, and establish a network of interactive, ultra-firm boundaries accounting information system. of: Ran Qiuhong Source: