コスト削減の考え方

Cost reduction

Way of thinking

★ What is the cost used for? It is "used to solve the problem". If this is the basis and the purpose is unclear, there is no need to use the cost.

★ When using costs, it is necessary to set the expected results concretely numerically and check whether the expected results were obtained by using the costs, and the results will not exceed the used costs. It cannot be said that the "problem" has been solved.

★ For example, if you spend money on hiring a part-time job because there are not enough people, advertising because sales are poor, etc., hire a number of part-time workers to complete the work in days, advertise millions of yen Originally, we had to set a goal of increasing sales by hundreds of millions of yen in advance, and after the end, we had to verify whether the set results were achieved.

★ However, it is often the case that you spend the cost without setting a goal, or you set a goal but end it without verification, but these common points are to use the cost. That is the purpose, and it is forgotten to say that the original purpose is to "solve the problem".

★ Also, since I used the cost last year, I have a track record of using it this year as well, so people tend to accept it without much complaints, but it is different whether or not the problem can be solved by that.

★ The corporate environment these days is changing so rapidly that the same thing rarely happens every year, and just because it was effective the previous year does not mean that the same effect will be obtained this year. It is necessary to always confirm "what is the problem to be solved" without being bound by past achievements, and if the purpose of use of the cost used habitually and inertially is clarified, the effectiveness of the cost will be improved. It turns out.

★ Any company is required to meet the expectations of its stakeholders (shareholders, customers, employees, business partners, local communities / society) through its corporate activities, and profits are the source of that.

★ As expressed by [Profit = Sales-Cost], profit is determined by how much the difference between sales and cost can be widened, so in order to make profit, increase sales as much as possible and reduce costs as much as possible. Is necessary.

★ Even if either sales management or cost management is neglected, management will not work well, so it is always necessary to think about increasing sales and reducing costs in an integrated manner.

★ However, in general, each company has an image of "offensive" to increase sales, but since there is a strong image of "defense" to reduce costs, only passive efforts are being made, and this will reduce costs. Even if you go, you can't expect any results, just a cautious "challenging" of fire.

★ The cause is that there are few people in the company who are familiar with costs, so the value of cost reduction is unknown or has no value. You can only demonstrate it and realize its value.

★ In the department store where I worked for a while, the method of making the management aware of the value of cost reduction is a crisis situation where the business performance deteriorates and the budget can not be done with this, but there is no measure from the sales side and it is said that it will be abandoned. At that time, we proposed and implemented a drastic cost reduction measure, which was shown in the "result" of "budget achievement."

★ In this way, "cost reduction" is relied on "when the budget cannot be made", and for that purpose, always keep an eye on the progress of the budget from the point of "creating a budget" and reduce the shortage cost. It is necessary to prepare so that it can be covered by, and even if it is an amount of 100 million units, it is meaningless if you do it thoroughly when you have to do it and produce results.

★ It is necessary to change the mindset of the person in charge in order to continuously carry out "cost reduction" without finishing it only once, and the person in charge related to cost such as personnel, accounting, general affairs, etc. is simply "maintaining and continuing" the work. It is necessary to make people strongly aware that the mission is "quality improvement" and "cost reduction" of business.

★ There is a limit to how much profit can be generated to achieve the budget by making efforts without changing the current situation, and it is necessary to review how to use costs on a zero basis and reform the cost structure.

★ When re-washing, it is related to cost, such as "Is it okay if there are rules but it is not followed?" "Is it okay if they are executed so separately?" "Is it okay to order at this price?" We will not be bound by the customs and shigarami of the past, but will compose only the elements necessary to achieve the goal and link it to the results.

★ In "cost reduction", it is necessary to have a "reform" idea that drastically reviews the values, and without being satisfied with the current situation, always "make the combination that can maximize the results", that is, "cost". With the aim of "optimizing the structure," I believe that we will continue to change our values indefinitely.

★ What is the cost used for? It is basically "used to solve problems".

★ When using the cost, it is necessary to set the expected effect concretely numerically and check whether the expected effect was obtained by using the cost, and the result does not exceed the used cost. It cannot be said that the "problem" has been solved.

★ For example, if you spend money on hiring a part-time job because there are not enough people, advertising because sales are poor, etc., hire a number of part-time workers to complete the work in days, advertise millions of yen Originally, we had to set a goal of increasing sales by hundreds of millions of yen in advance, and after the end, we had to verify whether the set effect was obtained.

★ However, it is often the case that you have used the cost without setting a goal, or you have set a goal but ended up without verification, but these are for the purpose of using the cost. The main reason is that we forget the purpose of solving the problem.

★ This is also common, but since I used it last year, I will use it this year as well, but since I have a track record of using costs, people around me do not complain so much, but whether it can solve the problem or not Is different.

★ The corporate environment these days is changing so rapidly that the same thing rarely happens every year, and just because it was effective the previous year does not mean that the same effect will be obtained this year. It is necessary to always confirm "what is the problem to be solved" without being bound by past achievements, and it is meaningless to clarify the purpose of use of costs that are habitually and inertially used in this way. The cost is known.

Cost reduction ideas
1. Make profits from costs
★All companies are required to meet the expectations of their stakeholders (shareholders, customers, employees, business partners, local communities and society) through their business activities, and the source of this is profit.
★As Profit = Sales - Costs, profits are determined by how much the gap between sales and costs can be increased, so in order to increase profits it is necessary to increase sales as much as possible and reduce costs as much as possible.
★If either sales management or cost management is neglected, the business will not run smoothly, so you must always consider increasing sales and reducing costs as one entity.
★In each company, increasing sales is seen as an "offensive" approach, while reducing costs is seen as a more "defensive" approach, so only passive efforts are being made. Even if costs are reduced in this way, it will only be a kind of "call for caution" and no results can be expected.
★The reason for this is that there are few people in the company who are knowledgeable about costs, so they do not understand the value of cost reduction or do not see the value in it. The only way to solve this is to demonstrate results through cost reduction.
★At the department store where I previously worked, the way I got management to recognize the value of cost reduction was to propose and implement drastic cost-cutting measures when the company was faced with a critical situation where performance was deteriorating and they were at their wit's end because they could not make a budget, and there were no solutions in terms of sales.
★The time when "cost reduction" is relied upon like this is when a budget cannot be created based on sales, and in order to do so, it is necessary to constantly keep an eye on sales progress from the point of "creating a budget" and be prepared to make up for any shortfall through cost reduction.Even if it involves amounts in the hundreds of millions, when it is necessary to do it thoroughly and produce results, there is no point in it.

2. Use costs to solve problems
★The basic principle is that the cost is used to solve problems.
★When spending money, it is necessary to set specific numerical values for the expected effect and then check whether the expected effect has been achieved after spending the money. Unless the results exceed the costs spent, it cannot be said that the "problem" has been resolved.

3. The evaluation criterion is the "eyes of the market."
★For those in charge of costs, when ordering goods or work, the key point is whether the order price is lower than before and whether they can obtain it at a price that is reasonable when compared to the market price.
★To do this, you need to know the "unit price" for the specifications of the goods and services you are currently ordering, as well as understand industry trends and check market prices.If you do this on a regular basis, you will be able to respond flexibly even if prices fluctuate.
★It takes a lot of time and effort to understand the "market price," but the quickest way to do it is to conduct "competitive bids."
★Conducting "competitive bidding" may seem like a difficult task, but to begin with, it is fine to only do it with vendors you currently have a relationship with, so it would be a good idea to try doing "competitive bidding" for any items or work that you are ordering that is the same but that you have ordered from multiple vendors.
★When you conduct a ``competitive bid,'' you can clearly see how high your previous order price was, and when you add new contractors to the ``competitive bid,'' unexpected prices may come up, so it is very important to look at ``price'' through the ``eyes of the market.''

4. "Cost" is also "unit price" x "quantity"
★Just like sales, "cost" is determined by "unit price" x "quantity", so "cost reduction" means that the "unit price" has gone down, the "quantity" has decreased, or both have been achieved, and it cannot be achieved in any other way.
★In order to "lower/reduce" the "unit price" and "quantity" that determine "cost," it is necessary to break the cost down into its constituent elements and "change" the elements that are related to the "unit price" and "quantity."

5. Change the "components" of costs
★"Cost" is composed of "unit price" x "quantity," so to change "cost," you can either change the "unit price" or the "quantity." However, when it comes to "cost reduction," even if you change the "unit price" or "quantity" while leaving the broad categories of "cost" account items such as "labor costs," "facility costs," "advertising costs," and "operating costs" intact, because these are all-encompassing categories, it is difficult to grasp what to do and it is difficult to come up with ideas.
★To do this, it is necessary to break down the large categories of accounting items into medium and small categories. Then, extract the components of the small cost items and verify each one. By considering whether changing the "components" will lower the "unit price" or reduce the "quantity," you can create measures.
★For example, in the case of "office supplies expenses" under "operating expenses," you would identify the items that make up that, such as "notebooks" and "files," and then extract the "material," "size," "color," "ordering person," "ordering company," "usage rules," etc. that make up those items, and consider whether "the material," "the size," "the color," "the ordering person," "the ordering company," "the usage rules," etc. can be changed in order to lower the "unit price" and "quantity."
★Changing the components changes the previous "unit price" and "quantity," which means that "cost reduction" has been achieved by changing the elements that make up the "cost structure," and "cost reduction" means "variably changing" the "components" of fixed costs. And to make the cost reduction measures you have formulated effective, it is necessary to set "rules," "processes," and "power."

6. Decide on the "rules," "processes," and "power."
★To get things done, you first need to set a desired "purpose," then you need "rules" such as standards and regulations to execute accurately in order to achieve that set "purpose."
★And to ensure that the established "rules" are followed, you need a "process" such as the steps and methods for executing the "rules."
★In order to ensure that the established "rules" and "processes" are followed, you need the "power" to give instructions for execution and inspect the execution.
★This is the same when implementing "cost reduction," and measures will be effective by setting "rules," "processes," and "power."

[Settings perspective]
① Rules
◆ Are new "rules" necessary?
◆ Are the "rules" necessary to be changed?
◆ Are the "rules" necessary to be thoroughly publicized and reinforced?
◆ Are the "rules" necessary to be unified?
◆ Are the "rules" necessary to be abolished? etc.

② Process
◆ Is a new "process" necessary?
◆ Is it necessary to thoroughly publicize and reinforce the "process"?
◆ Is it necessary to standardize the "process"?
◆ Is it necessary to consolidate the "process"?
◆ Is it necessary to simplify the "process"?
◆ Is it necessary to abolish the "process"? ...etc.

③ Power
◆Do we need a new "power"?
◆Do we need to thoroughly publicize and reinforce "power"?
◆Do we need to consolidate "power"?
◆Do we need to abolish "power"? ...etc.
As mentioned above, when implementing cost-reduction measures, three things need to be "decided" - "rules," "process," and "power." However, even if the "rules" have been decided, can the measures be implemented and results expected with the current "process" and "power"? Or do you also need to "decide" on the "process" and "power"?

From past experience, once a "rule" was decided, the related "process" had to be decided in order to proceed with it, and to comply with and execute the "rule" and "process," it was also necessary to decide on the related "power" in order to implement the policy. In order for the policy to function effectively, it was often necessary for these three things to work together.

★office-doi copyright2013 kazuo.doi All rights reserved

Cost reduction

Way of thinking

★ office-doi copyright2013 kazuo.doi All rights reserved