This website uses cookies to ensure you have the best experience. Learn more

Cost Reduction Essay

4991 words - 20 pages

Intelligent Cost Reduction
Developing & executing a program to reduce cost & create a sustainable operating platform
July 2008



Contents

Section
1 2 3 4 5 6 Point of view Anatomy of a successful total cost management program Beginning with the business & front office Opportunities in the support units Some lessons learned PwC qualifications to help

Page
3 7 11 16 19 21

Point of view

Point of view
• Cost management is a key issue today and for the foreseeable future – The market is experiencing a severe liquidity crunch and the explosion of a global asset bubble well beyond sub-prime. At the root of this crisis is not only asset values, but the amount of capital ...view middle of the document...

Many do not understand the true profitability of those businesses today at the proper level of granularity (e.g., desk level, product, etc.). To make the right decisions regarding the business platform going forward, a fundamental understanding of where the institution does and doesn’t make money is now more important than ever. Of particular importance is the need to understand the interrelationships between different businesses, products and geographies and the overall impact of curtailing or exiting certain activities on the broader franchise. • Focusing on operational costs only will not be sufficient – Organizations have focused most previous cost cutting efforts largely on back office operating costs. Areas such as front office costs, the costs of risk management failures and funding costs will have to be considered in new ways to achieve a cost baseline that is acceptable in today’s markets. Operating costs will also have be re-examined as well, of course, and perhaps in different ways.

PricewaterhouseCoopers

4

Intelligent Cost Reduction

Point of view (continued)
• Many organizations confuse “cost postponement” with total cost management – Many financial institutions simply stop investing in new projects and people during difficult times in the market. Further, many simply reduce their support teams, etc., and hire them back when the markets bounce back. There is often a price to pay for these moves in terms of customer loyalty, heightened risk and future profitability. We consider many of these actions cost postponement as opposed to true cost reduction. We recommend that our clients measure the quality of their efforts through analyzing the types of reductions they are making and how they impact the platform and the company longer term. • A well organized end-to-end program is needed – Many organizations have a cost cutting “czar” or team, but lack an organizational-wide approach to the issue. This leads to sub-optimal execution, missed targets and worse. Avoiding these pitfalls requires an overall program structure with a clear executive mandate, defined targets, a management organization for the effort and strong engagement from each of the business units and support areas. • Consistent investment is required – Building a sustainable competitive cost platform requires consistent investment, even in times of financial stress. Given the markets today, managing the program in a way that creates investment funds through tactical, short-term savings to fund medium to longer term savings is critical. • The tone at the top is key – The overall objectives, targets and business decisions made at the executive management level are more important than ever to achieving sustainable improvement. • Create an executive dashboard to monitor results – Implementing an executive dashboard with key metrics and reporting will help management to view and gauge the overall effectiveness of their program over time. • This is a survival issue on...

Other Papers Like Cost Reduction

Residential Sprinklers Essay

761 words - 4 pages April 10 2013 In this essay we will be discussing the benefits of the proposed legislation and will discuss the benefits it will promote include reduction of fire deaths, decrease in property destruction. We will discuss the community wide benefits and the economic impacts of the cost associated with sprinkler installations. Residential sprinklers have been around since the 1970’s. The first residential sprinkler ordinance was implemented

Solar Pv Grid Parity by Operational Excellence

1342 words - 6 pages Cost Reduction Opportunities for the PV Industry by Operational Excellence (in the march towards grid parity) Emilio Mera Global Development Director, BP Solar Álvaro Granada, CSU Mgr, BP Oil España Ramón Antelo, CEO, Galgano España Block 03: Natural Gas & Renewables Forum 14: State of the Art on Renewables (Wind and Solar) Sources of Energy Grid Parity: The Gap and the Business as Usual Levers • R&D driven levers

Privatization of Prisons

1356 words - 6 pages government entities due to the difference in accounting practices. Public agencies do not always include all expenses incurred at the specific agency level, such as; accounting, data processing and legal representation, to name a few (Mackinac). There is evidence, however, that shows economic benefits towards privatization. In a 1989 study conducted by Charles H. Logan and Bill W. McGriff, a 5.4 percent reduction in operating cost were reported

The Integrated Model

1695 words - 7 pages model. The article, “An Integrated Inventory Model with Controllable Lead time and Setup Cost Reduction for Defective and Non-Defective Items” presents an integrated inventory model with controllable lead time with setup cost reduction for defective and non-defective items under investment for quality improvement. The study is associated with the lead time and setup reduction as the opportunity cost and lead time are key factors in the inventory

Classic Airlines Marketing Solution

295 words - 2 pages (Classic Airline Scenario, 2010). To protect the company from possible bankruptcy, a 15% cost reduction has been implementedover the next 18 months. Each department will have cuts, with marketing hardest hit at 21.5% reduction versus sales and operations at 11.5% (Classic Airline Scenario, 2010). The following shows the cost reduction goals by department (Classic Airline Scenario, 2010). To make sure Classic Airlines does not go into bankruptcy

Organizational Behavior

1335 words - 6 pages of healthcare being provided, without consulting with the doctors, they cause a conflict within the group. Discuss the conflict management styles that are evident in the case. The conflict management style being used in this case would be the forcing style. Harding seems to have a win-lose approach to the intergroup conflict. She initiated a cost reduction change, computerized EKG readings, and then went on vacation for a week. She chose to make

Bus 640

803 words - 4 pages Appalachian Coal Mining believes that it can increase labor productivity and, there- fore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is MR 1,000 10P

Target Costing

2732 words - 11 pages TABLE OF CONTENTS ACKNOWLEDGEMENT 2 INTRODUCTION 3 CONTENT 4 1.0 DEFINITION OF TARGET COSTING 4 2.0 THE PURPOSE OF TARGET COSTING 4 3.0 CHARACTERISTIC OF TARGET COSTING 4 4.0 PRIMARY PROCESS OF TARGET COSTING 5 5.0 LIFE CYCLE COSTING 6 6.0 COST REDUCTION EFFORT 6 7.0 ADVANTAGES OF TARGET COSTING 7 CONCLUSION 9 APPLICATION TO INDUSTRY 9 REFERENCES 10 ACKNOWLEDGEMENT In performing our assignment, we had to take

Classic Airlines

778 words - 4 pages ? Can you let them go? • Board might be a constraint; might not accept all of Kevin’s marketing ideas with the cost reduction mandate • Union is a constraint cuz they will want the maximum for ees • Revamping the CRM does not guarantee that customers will stay; this is an assumption • Not including the right options in the Classic Rewards programs can be a constraint • That the 15% Percent cost reduction can hamper

Cost Allocation Academic Western

714 words - 3 pages services for both hospitals and Western Hospital handles maternity services for both. Recently, an issue with the charges for amniocentesis arose because Western Hospital demanded a reduction in the price for laboratory services. This price reduction is requested because Western Hospital found an outside laboratory that will provide the same services for $375 instead of $400. The hospitals formed a joint committee address the issue. The cost

Case 1 Erica Carson

554 words - 3 pages misspelled name/address and other errors on checks 2. Maintain Bank’s reputation and image for reliability 3. Maintain speed to market, quick turn custom jobs c. Attention to detail d. Courier services Best Conclusion = I recommend not making a change now. There is too much risk involved due to unknown supplier. Ask current suppliers to review potential for cost reduction and opportunity for increased revenue and cost reduction of scenic checks.

Related Essays

Research: Cost Reduction Or Cost Containment In Health Care

1870 words - 8 pages physicians and nursing staff to assist in cost containment. The heart of the matter is the need to determine how to knowledge share cost information and engage clinical individuals in cost reduction or cost containment. Literature Review Cost containment or reduction opportunities are identified in various articles; going green (Taheri MD, Butz PhD, Griffes MHA, Morlock MBA, & Greenfield MD, 2000) (Wormer MD, et al., 2013), standardizing equipment

•Assess How Ericsson Benefitted From Amazon Web Services (Aws) In Terms Of Cost Reduction, Automated Software Updates, Remote Access, And On Demand Availability

548 words - 3 pages Bernard Charles Ms. Winkler English 1002 A Pale Blue Eye I never thought in my wildest dreams that someone would be so anxious to dismantle an old man because of his blue eyes, especially when the old man never did any wrongdoing to anyone. Do not ever underestimate the power of darkness because you could be the next one in line? The Tell Tale Heart is a well-known demoniac story by

Accounting Essay

470 words - 2 pages Definition: Target costing is a cost management tool for reducing the life-cycle costs of a product through cost reduction in the early stages such as Research & Development, Design and Pre-production planning. In addition, competitive market such technologies field, this costing system can enable management team to manage the business to be profitable. This can be explained that the cost plus pricing in this method is not an option Actually

Far 3 Reconstruction Event Essay

1074 words - 5 pages recon structuring because the company suffered huge loss from credit crisis in the US. In order to keep the company continuous their operations, the company need to experience internal recon structuring, The company proposed share capital reduction pursuant to the Companies Act, 1965 involving the reduction of the par value of each existing ordinary share of PMI in issue from RM0.50 to RM0.05 via the cancellation of RM0.45 of the par value of