Cost is the value category of the commodity economy and is a component of the value of the commodity. With the development of the socialist market economy and the gradual establishment and improvement of the modern enterprise system, deepening the reform of cost management has increasingly become a prominent and urgent issue.
Survival of the fittest is the basic law of modern enterprise competition, enterprises to survive, strive for development, must take various measures to reduce costs, lower than the cost of competitors for production and operation, in order to be invincible in the fierce competition. Reducing costs has become the eternal theme of enterprise management.
The significance of reducing costsMarxist political economy points out that the value of a product is composed of three parts, that is, the value of the means of production consumed in production, the value created by the laborer for his own labor, and the value created by the laborer for the society. The cost of the product is the sum of the values of the first two parts.
Therefore, theoretically speaking, the cost of a product is the sum of the value of the means of production that the enterprise has already consumed in the process of producing the product, expressed in monetary terms, and the value created by the laborer equivalent to the wages of his labor.
In the highly competitive modern society, it is of great significance for enterprises to survive and develop, and to reduce product costs.
1. Reducing product costs is the basis for enterprises to expand reproduction. Only after deducting the cost of products and compensating for other labor expenses can the remaining funds be used for the expansion and reproduction of the enterprise. If the cost of the company's products is too high, and the company's income is offset by the cost of the product and other expenses, the enterprise will not be able to expand reproduction.
2. Reducing product costs is an important means to strengthen enterprise management. Product cost is a comprehensive indicator, through the economic accounting and analysis of product cost, we can see whether the use of raw materials is reasonable and economical, the increase and decrease of product output, the increase and decrease of product output, etc. These can reflect the management level of the enterprise, so as to promote the enterprise to improve the operation and management.
3. Reducing product costs is a necessary condition for improving the competitiveness of enterprises. Only by continuously reducing product costs and saving manpower, material and financial resources can enterprises gain a firm foothold in the increasingly fierce market competition.
Ways and means to reduce costsThe cost of any kind of product of a modern enterprise from design to profitability is not limited to the cost of the manufacturing stage, but runs through the entire cost of the product life cycle. This process includes not only the production process of the product, but also the whole process of product development and design and product sales.
(1) Methods to reduce product costs in the design stage
Generally speaking, there are five ways for modern enterprises to improve the value of their products: one is to improve functions and reduce costs;Second, the function remains unchanged and the cost is reducedThird, the cost remains unchanged and the function is improvedFourth, the function has decreased slightly, but the cost has been greatly reducedFifth, the cost is slightly higher, but the function is greatly improved.
Therefore, in the process of product design, it is necessary to fully compare the design scheme, optimize the engineering design, and implement scientific decision-making on the scheme, so that the product quality of the design project, that is, the final value of the product, is reflected in the economic and social benefits.
When developing and designing a new product, in addition to the cost of the material, it is also necessary to consider whether the application of the material will lead to an increase in costs in other aspects. For example, whether the materials used are easy to procure, store, assemble and ship.
In fact, when designing a new product, if the R&D personnel do not have comprehensive consideration, they often have to temporarily add certain materials or increase the difficulty of assembly in the rectification process to solve some of its defects. These temporary additions to materials will not only increase the cost of materials, but also increase the complexity of assembly in the production process, indirectly affect the efficiency of mass production, and it is also easy to cause a significant increase in the consumption of related materials, auxiliary materials, etc., these additional costs are often much greater than the cost of their surface.
New products typically take a long time to bring to market in large quantities, the biggest reason being that they don't meet the design requirements in one go, and often need to be redesigned and retested several times. Assuming that a company estimates the cost of each design error is 2,000 yuan, if the average number of times each new product needs to be modified is 5 times before the new product development and design is put into production, and 10 new projects are introduced and developed every year, the error cost is *** yuan.
From this simple calculation, it can be seen that every modification is bound to bring a certain loss to the company (waste of materials, labor, efficiency, etc.) before it is delivered to normal production. Time delays in redesigning a product to reduce errors will result in a later product to market, and lost sales due to missed opportunities will be deplorable. Therefore, the development and design of R&D designers should try to improve the success rate of a design without affecting cost and performance.
(2) Methods to reduce product costs in the manufacturing stage
The product is made of raw materials through processing, and the level of raw material procurement directly affects the production cost of the product. The control of procurement costs accounts for about 20 30% of the share of the whole process. Enterprises must have full control over the procurement of raw materials**, procurement contracts, procurement quantity and quality requirements. There are two main measures that can be taken to reduce the cost of material procurement:
1) Price comparison procurement. Implement an open bidding system for materials with large consumption, so that the best businessmen can compete openly and reasonably in terms of quality and quality of the materials used by the unit. This method is not only conducive to reducing the procurement cost of materials, but also improving the quality of purchased materials.
2) Implement the target purchase price. Price comparison procurement is for the main raw materials that constitute the product, its use is large, and the material is abundant, but not all materials can be used to compare the price of the method, for some special raw materials and purchased parts, you can implement the target purchase price.
The target purchase price is to convey the information of the materials required by the unit according to the product design concept and target cost to the best business and external stakeholders, seek their cooperation, and require them to design the best materials and the best quality around their own goals.
To manufacture a product, although the design is optimized and the purchase of high-quality and low-cost raw materials and purchased parts, the control of product cost in the manufacturing process can not be ignored, which accounts for 20 30% of the entire target cost control share. The items to control the cost are: the control of the quota consumption of raw and auxiliary materials, the control of the process quota, the control of the period expenses, the control of the balance of the product, and the control of the scrap rate of the product. In the process of implementing the control project, the following two points should be grasped:
1) Subdivide cost control to individuals. The target cost is forced through the target selling price and the target profit. The target cost must be subdivided and refined to each department and each person in order to be effectively controlled. This is to divide the cost into several different types of cost groups according to the cost items and the different functions of various departments and positions, so that each cost item has a responsible department and responsible person.
In the process of cost segmentation, the focus of cost control should be on the main departments, such as the saving and utilization of raw materials as the focus of the manufacturing department. Improving product quality and reducing product scrap rates are also key to reducing costs.
In terms of labor, it is necessary to calculate the quota personnel and the non-quota personnel separately, the quota personnel calculate the salary according to the output and workload, and the non-quota personnel calculate the salary with the basic salary, responsibility salary and bonus, of which the salary and bonus are linked to the output efficiency.
The principle of calculating wages is not only within the range of target costs, but also to mobilize the production enthusiasm of employees. In terms of auxiliary costs, it is mainly focused on controllable projects, such as reasonable arrangement of electricity consumption time and the use of power-saving innovative technologies.
2) Establish effective monitoring and safeguard measures. After quantifying the control product cost segmentation to individuals, effective monitoring and safeguard measures must be established to ensure the smooth implementation of the target cost.
First of all, it is necessary to strengthen the responsibility management of target costs, and to change the operating mechanism within the enterprise in accordance with the requirements of the modern enterprise system.
The second is to strengthen the accounting management of target costs, establish a financial department as the accounting center, do a good job in accounting, and publish the control of target costs on a monthly basis.
The third is to strengthen the assessment and management of target costs, establish a vertical and horizontal management system with the enterprise management department as the axis, improve the assessment and monitoring network of target costs, and ensure the normal operation of target costs.
(3) Methods to reduce product costs in the sales stage
In today's increasingly fierce market competition, the demand of the market is changing rapidly. In the product sales stage, the top priority to reduce costs is to eliminate the disadvantages brought by a large amount of inventory to the enterprise.
The inventory of the enterprise occupies a large amount of capital, which makes it difficult for the enterprise to have a weekly capital, which affects the normal production of the enterpriseThe larger the inventory, the higher the inventory cost and the greater the storage feeThe longer the inventory time, the more serious the damage and mildew will be, which will increase the cost of products and seriously affect the economic benefits of the enterprise.
Moreover, with the continuous change of the market economy, the speed of product replacement is accelerating, and many products are facing the risk of being replaced. Therefore, reducing inventory or even achieving zero inventory has become a concern for every business and should be solved as soon as possible.
Zero inventory does not mean that there is no inventory, the so-called zero inventory refers to the materials (including raw materials, semi-finished products, etc.) in procurement, production, sales, distribution and other business links, not in the form of warehouse storage, but in a state of turnover. Therefore, the realization of zero inventory focuses on optimizing the ** chain.
The process of procurement, transportation, processing and manufacturing, distribution and finally delivery to customers is regarded as an interlocking chain, which is the first chain. It includes all the companies and businesses involved in the production, distribution, and sale of the product before it reaches the customer.
The optimization goal of the chain is to deliver the qualified products required by customers to the specified place at the right time and in the right quantity, so as to minimize the total cost and achieve zero inventory.
Modern enterprises need to continue to seek new ways to reduce costs in essence, and strive to fundamentally control the cost of climbing, such as comprehensive quality control, in the form of "zero defects" to avoid almost all maintenance costs and other costs caused by unqualified products, is to explore the potential of cost reduction from the perspective of management with the idea of cost control, and combine pre-prevention and post-adjustment to avoid unnecessary costs and achieve the purpose of cost control.
Ways to reduce costs
1. Establish a comprehensive budget management system
2. Establish the strategic concept of enterprise production cost management;
3. Improve the management level of enterprise human resources;
4. Grasp the relative balance between product quality and product cost;
5. Reform and innovate the management environment of the production department;
6. Implement the management system of full cost management and whole-process cost control.
Production cost, also known as manufacturing cost, is the production unit in the process of production and operation, for the production of products or the provision of labor services incurred in the expenditure, is an important indicator to measure the level of enterprise technology and management. The composition of production costs mainly includes direct materials, direct labor and manufacturing expenses.
Ways to reduce costs
1. Negotiation. Negotiation is the process of reaching an agreement between buyers and sellers for their respective goals, which is also a skill that procurement personnel should have. Negotiation is not limited to the first aspect, but also applies to some specific needs, and the reduction in ** can usually be expected to be 3-5% using the negotiation method. If you want to achieve a larger reduction, you need to use methods such as cost analysis, value analysis and value engineering (VAVE).
2. Target cost. The target cost approach is a cost management process used to reduce the total cost of new product planning and design phases, and it eliminates the uncertainty of new products. It subtracts the target cost by determining a competitive sales rate** before assembling or designing a component, and then determining the target profit required to ensure the company's continued profitability. The final product is subdivided and the cost proportion of each part is assigned, so that the purchaser and the supplier can understand each other and work closely together to design the parts on the correct cost basis.
3. Early business participation, ESI. Early business participation is to let the cooperating business partners participate in cross-functional groups in the development of new products. When a business owner has a set of performance specifications, it can take advantage of its expertise and processes. The so-called performance specification refers to a set of conditions that must be met by the parts provided by the company.
4. Promote procurement. With the decentralization of management and the fact that many global companies are proactively establishing or evaluating local and overseas operations, it has become clear that the procurement function has become a decentralized, non-standardized process. Large quantities of orders are often divided among one or two merchants, rather than one or two. Therefore, it is essential that the parts and services used by the various departments, groups and regions are clearly identified and coordinated in order for the company to realize significant cost savings.
5. Group procurement. Group procurement is to gather many enterprises that are interested in purchasing, so that the number of purchases reaches a certain level to reduce costs. More recently, the focus on group procurement has created a new kind of service industry: third-party procurement. Under this method, an independent group acts as a procurement, which utilizes a huge volume of purchases to reduce costs while also charging members a small service fee.
6. Cost and analysis of the cost. For professional procurement, if they do not have a thorough understanding of the cost classification of the products they purchase, they will not be able to understand the products they are buying, and they may miss the opportunity to significantly reduce costs.
7. Plan procurement. The procurement plan ensures that the purchased parts are recognized by the best suppliers, and must use professional terminology and industry standards.
8. Standardization. This widely accepted approach is only one aspect of a fully standardized program. It includes reducing the number of customizations or reducing parts. Many companies find that working closely with a company and understanding their processes can bring additional benefits. There is no particular order for these 10 approaches, and more than two approaches are generally used in successful, formal cost-reduction initiatives.
Of course, the approach to be adopted should depend on four factors: the type of product purchased, the stage of the product in its life cycle, the number of vendors, and the annual expenditure. Cost and analysis should apply to all procurement transactions.