{"id":6726,"date":"2020-06-09T07:26:15","date_gmt":"2020-06-09T12:26:15","guid":{"rendered":"https:\/\/flevy.com\/blog\/?p=6726"},"modified":"2020-12-19T22:20:25","modified_gmt":"2020-12-20T03:20:25","slug":"integrated-cost-management-an-organizations-prescription-for-lower-cost","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/integrated-cost-management-an-organizations-prescription-for-lower-cost\/","title":{"rendered":"Integrated Cost Management: An Organization\u2019s Prescription for Lower Cost"},"content":{"rendered":"

There is a general belief among organizations that a large percentage of a product\u2019s costs are locked in by design.\u00a0 It is assumed that \"\"little can be done once the design is set.\u00a0 This assumption has influenced cost management programs across diverse products\u2019 life cycles. As a result, the focus during the design phase is Cost Reduction<\/a> and Cost Containment<\/a> during the manufacturing phase.<\/p>\n

Yet, organizations that operated in a highly competitive market and demanded aggressive cost management showed that costs can be aggressively managed throughout the product life cycle<\/a>.\u00a0 Various cost management strategies or techniques may be used to increase the program\u2019s overall effectiveness. One of them is the Integrated Cost Management<\/a>.<\/p>\n

A Purview on Integrated Cost Management<\/strong><\/h2>\n

Integrated Cost Management is every organization\u2019s prescription for lower cost and higher profits. It is the 21st<\/sup> business approach to achieving Cost Management efficiency.<\/p>\n

Integration is necessary for Strategy Development<\/a> as it can promote the achievement of the company\u2019s profit objectives. In fact, there are major benefits to Integrated Cost Management. One of which is lowering of overall costs throughout the product life cycle.<\/p>\n

Integrated Cost Management can facilitate a steady decrease in costs all the way to discontinuance.\u00a0 In fact, it can result in an annual cost reduction of about 17% during manufacturing, savings that exceed 30$%, and a designed-in cost of below 70%.<\/p>\n

Achieving this requires an understanding of the Integrated Cost Management Approach.<\/p>\n

The Integrated Cost Management Approach<\/strong><\/h2>\n

The Integrated Cost Management Approach<\/a> focuses on the integration of cost management techniques which can lead to higher levels of cost reduction and superior overall performance.<\/p>\n

\"\"<\/a><\/p>\n

The Integrated Cost Management Approach takes into consideration 5 Cost Management Strategies.<\/p>\n

    \n
  1. Target Costing<\/strong>. This is the technique used or applied during the design stage.\u00a0 It is a feed-forward mechanism that enables the retooling of the design of new products to reduce costs while maintaining the desired level of product functionality and quality.<\/li>\n<\/ol>\n
      \n
    1. Product-Specific Kaizen Costing<\/strong>. This is a technique that enables the rapid redesign of a new product during the early stages of manufacturing to correct any cost overruns.\u00a0 (Note:\u00a0Kaizen<\/a> is the general term for Continuous Improvement and often associated with Lean Management<\/a>.)<\/li>\n<\/ol>\n
        \n
      1. General Kaizen Costing<\/strong>. General Kaizen Costing is a technique that focuses on the way a product is manufactured with the assumption that the product\u2019s design is already set. It is generally effective in addressing manufacturing processes that are used across several product generations.<\/li>\n<\/ol>\n
          \n
        1. Functional Group Management<\/strong>. This is a technique that is used to break down the production process into autonomous groups and treat each as a profit center.<\/li>\n<\/ol>\n
            \n
          1. Product Costing<\/strong>. Product Costing is a technique that coordinates the efforts of the other four (4) techniques by providing important, up-to-date information.<\/li>\n<\/ol>\n

            The 5 Cost Management Strategies enable organizations to better manage costs throughout the product life cycle, with just one (1) technique taking place during the product design and the rest during manufacturing.<\/p>\n

            The Key Takeaways<\/strong><\/h2>\n

            The application of the 5 Cost Management strategies<\/a> has its key takeaways. These can be used as a guidepost in its application and a model of general concepts that organizations may consider.<\/p>\n

            One key takeaway is significant savings can still be achieved with short life cycle products and aggressive cost management focused on product design.\u00a0\u00a0 Taking to note this key takeaway, we have to consider that as the length of the manufacturing phase of the product\u2019s life cycle increases, the opportunity for cost reduction increases.\u00a0 Further, there is a need to explore the value of integrating multiple cost management during manufacturing.<\/p>\n

            Interested in gaining more understanding of Integrated Cost Management<\/a>? You can learn more and download an editable PowerPoint about Integrated Cost Management<\/strong> here on the Flevy documents marketplace.<\/a><\/p>\n

            Do You Find Value in This Framework?<\/h2>\n

            You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library<\/a>. FlevyPro<\/a> is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:<\/p>\n

            “My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”<\/p>\n

            \u2013 Bill Branson, Founder at Strategic Business Architects<\/p>\n<\/blockquote>\n

            “As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”<\/p>\n

            \u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p>\n<\/blockquote>\n

            “As a small business owner, the resource material available from FlevyPro has proven to be invaluable. The ability to search for material on demand based our project events and client requirements was great for me and proved very beneficial to my clients. Importantly, being able to easily edit and tailor the material for specific purposes helped us to make presentations, knowledge sharing, and toolkit development, which formed part of the overall program collateral. While FlevyPro contains resource material that any consultancy, project or delivery firm must have, it is an essential part of a small firm or independent consultant’s toolbox.”<\/p>\n

            \u2013 Michael Duff, Managing Director at Change Strategy (UK)<\/p>\n<\/blockquote>\n

            “FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight \u2013 it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”<\/p>\n

            \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p>\n<\/blockquote>\n

            “Several times a month, I browse FlevyPro for presentations relevant to the job challenge I have (I am a consultant). When the subject requires it, I explore further and buy from the Flevy Marketplace. On all occasions, I read them, analyze them. I take the most relevant and applicable ideas for my work; and, of course, all this translates to my and my clients’ benefits.”<\/p>\n

            \u2013 Omar Hern\u00e1n Montes Parra, CEO at Quantum SFE<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

            There is a general belief among organizations that a large percentage of a product\u2019s costs are locked in by design.\u00a0 It is assumed that little can be done once the design is set.\u00a0 This assumption has influenced cost management programs across diverse products\u2019 life cycles. As a result, the focus during the design phase is… Integrated Cost Management: An Organization\u2019s Prescription for Lower Cost<\/span><\/a><\/p>\n","protected":false},"author":111,"featured_media":6728,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[82,81],"tags":[2018,2016,2017,77],"class_list":["post-6726","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-operations","category-strategy","tag-5-cost-management-strategies","tag-integrated-cost-management","tag-integrated-cost-management-approach","tag-strategy-development"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/6726","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/111"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=6726"}],"version-history":[{"count":9,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/6726\/revisions"}],"predecessor-version":[{"id":7995,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/6726\/revisions\/7995"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/6728"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=6726"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=6726"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=6726"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}