148342
Description
Mind Map by Shahid Musthafa, updated more than 1 year ago
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Created by Shahid Musthafa
over 11 years ago
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Steps to
Remove
Cost GAP
- Review the
product features
- Remove features from the product that add to cost
but do not significantly add value to the product when
viewed by the customer. This should reduce cost but
not the achievable selling price. This can be referred
to as value engineering or value analysis.
- Remove features from the product that add to cost
but do not significantly add value to the product when
viewed by the customer. This should reduce cost but
not the achievable selling price. This can be referred
to as value engineering or value analysis.
- Team
Approach
- Cost reduction works best when a team
approach is adopted. Edward Limited should
bring together members of the marketing,
design, assembly and distribution teams to
allow discussion of methods to reduce costs.
Open discussion and brainstorming are
useful approaches here.
- Cost reduction works best when a team
approach is adopted. Edward Limited should
bring together members of the marketing,
design, assembly and distribution teams to
allow discussion of methods to reduce costs.
Open discussion and brainstorming are
useful approaches here.
- Review the
whole
supplier chain
- Each step in the supply chain should be
reviewed, possibly with the aid of staff
questionnaires, to identify areas of likely
cost savings. Areas which are identified
by staff as being likely cost saving areas
can then be focussed on by the team.
- For example, the questionnaire might ask ‘are
there more than five potential suppliers for this
component?’ Clearly a ‘yes’ response to this
question will mean that there is the potential for
tendering or price competition.
- For example, the questionnaire might ask ‘are
there more than five potential suppliers for this
component?’ Clearly a ‘yes’ response to this
question will mean that there is the potential for
tendering or price competition.
- Each step in the supply chain should be
reviewed, possibly with the aid of staff
questionnaires, to identify areas of likely
cost savings. Areas which are identified
by staff as being likely cost saving areas
can then be focussed on by the team.
- Control the
Material
Costs
- Edward Limited should look at the significant costs
involved in components. New suppliers could be
sought or different materials could be used. Care
would be needed not to damage the perceived
value of the product. Efficiency improvements
should also be possible by reducing waste or idle
time that might exist. Avoid, where possible,
non-standard parts in the design.
- Edward Limited should look at the significant costs
involved in components. New suppliers could be
sought or different materials could be used. Care
would be needed not to damage the perceived
value of the product. Efficiency improvements
should also be possible by reducing waste or idle
time that might exist. Avoid, where possible,
non-standard parts in the design.
- Efficient
Assembly
of workers
- Productivity gains may be possible by changing
working practices or by de-skilling the process.
Automation is increasingly common in assembly and
manufacturing and Edward Limited should investigate
what is possible here to reduce the costs. The
learning curve may ultimately help to close the cost
gap by reducing labour costs per unit.
- Clearly reducing the percentage of idle
time will reduce product costs. Better
management, smoother work flow and
staff incentives could all help here.
Focusing on continuous improvement in
production processes may help.
- Clearly reducing the percentage of idle
time will reduce product costs. Better
management, smoother work flow and
staff incentives could all help here.
Focusing on continuous improvement in
production processes may help.
- Productivity gains may be possible by changing
working practices or by de-skilling the process.
Automation is increasingly common in assembly and
manufacturing and Edward Limited should investigate
what is possible here to reduce the costs. The
learning curve may ultimately help to close the cost
gap by reducing labour costs per unit.
- Controlling
Overheads
- Productivity increases would also help here by spreading
fixed overheads over a greater number of units. Equally,
Edward Limited should consider an activity based costing
approach to its overhead allocation, this may reveal more
favourable cost allocations for the digital radio or ideas for
reducing costs in the business.
- Productivity increases would also help here by spreading
fixed overheads over a greater number of units. Equally,
Edward Limited should consider an activity based costing
approach to its overhead allocation, this may reveal more
favourable cost allocations for the digital radio or ideas for
reducing costs in the business.
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