Cost Management Center ability for profit

Transcription

1 Cost Management Center ability for profit Tampereen teknillinen yliopisto Cost Management Center

2 What is Cost Management Center? Research team in (TUT) that combines academic research, practical development and professional education Field of expertise: cost accounting Established in 1998 Personnel Ph.D. (Tech.), Prof. 1 Ph.D. 2 Lic. (Tech.) 2 M.Sc. (Eng.) 4 Engineering students 1-3 2

3 Mission CMC seeks to improve the competitiveness of companies using the means of accounting. Strong emphasis on field study with selected partners. Based on the findings, best practises are analysed and published. 3

4 Examples of topical projects From cost accounting to cost Costs of standardisation Life cycle profitability of industrial b-2-b products Supply chain productivity improvement R&D and production collaboration Win-win principle Open-book cost Value network Customers process value New revenue generating models Life cycle costing Current industrial practices Applications for investment goods cost Standardization and business logic Strategic shift from project business to standard products Profitability in changing environment 4

5 Publication policy The main focus is on producing high-quality scientific papers, e.g. refereed papers in Finnish Journal of Business Economics European Journal of Innovation Management Industrial Marketing Management International Journal of Innovation Management International Journal of Production Economics International Journal of Electronic Business Technovation Dozens of conference papers For the comprehensive list of CMC publications, see 5

6 Professional education Subject areas including ABC Cost Conscious R&D ERP System Financial Control and Internal Reporting Financial Control of a Software Project Financial Information for Manufacturing & Marketing Financial Information for SMEs Implementation of ABC Interpretation of Preconditions for Business from Financial Statement Research Methods in Business Economics Supplier Co-Operation Some corporate references ABB Juvenes KCI Konecranes Group Kiilto Nokia Oyj Nokian Renkaat Sandvik Tamrock Tampere Technology Centre Teleste Toijala Works TUT Edutech Urho Tuominen Wallac 6

7 Examples of past research projects Business Concepts for Industries The aim was to help our co-operating companies to manage and control profitability. This will be achieved through accurate product, customer, and supplier profitability information. Supply Networking (VaVe-Network) The aim was to improve the competitiveness of the companies of the supplier network of Sandvik Tamrock Tampere. As far as CMC is concerned, this was aspired by improving the co-operation between the companies in the area of cost. Cost Conscious R&D The aim was to establish useful tools based on cost accounting to support the decision-making in product development. 3G Network 2000 The aim was to improve the competitiveness of the companies belonging to the supplier network of Sulzer Pumps Finland. 7

8 Cost Conscious Network Cooperation Global mining and drilling equipment provider Desire for supply chain development Several cost projects conducted in the supplier companies by CMC 8

9 Cooperation or Competition? Cooperation Committed to work in collaboration Trust Feeling of justice Competition Best supplier is selected by specific criteria Independent work Openness Win-Win Cost Information and its role Cost of switching suppliers Win Need for Development 9

10 Network Costing One Step at a Time Cost information shared with the whole network Cost information shared with the customer Accurate cost information for internal purposes 10

11 Product Costing in Logistics Business Technical wholesaler providing components and engineering services Primary target to reveal product profitability Characteristic for the company: Large number of sales items and variation in the processes CMC created a costing model utilizing the existing product category portfolio 11

12 Product Portfolio Innovative Costing Tool Plenty of cost information hidden in the product category portfolio Products within a category have similar demands on resources and activities Volume Products Order-Based Products Prognosis-Based Products Strategic Products Product portfolio determines resource usage and activity structure of a product 12

13 From Traditional Supplier to System Supplier Metal industry system supplier Need for accurate product and customer cost information Strong desire to cooperate with the customer CMC built a product costing tool, which is in operative use 13

14 Win-Win: negotiating an acceptable profit 1. Consensus of costing principles, profitability measures and target ratios essential 2. Full product cost information to the customer 3. Future actions shaped by the negotiations Negotiations arranged by CMC on a neutral ground 14

15 Fully Integrated Product Costing Tool ABC - software (CostControl) Financial Administration Update cost element costs Cost Elements Resources Activities Enterprise Resource Planning System (IFS) Annual costs of Activities Work Center hour costs Workshop Managers Assign activities to products Activity Assigning Application (Excel) Activities Products Product Informa tion Routing handles direct labor and work costs along with material costs Indirect Activities Management / Sales Utilize cost reports Standard Product Cost Report Actual Product Cost Report Material and Work Center costs 15

16 Cost information shared with the whole network Hydraulic component supplier Modeling cost impact of vendor managed inventory Introducing open-book cost to the network 16

17 Cost information revealed Customer s cost reduction target Analysis of cost impact of new processes Open-book seminar for the network companies Seminar increased the cost and process awareness of the participants Deeper understanding of logistic costs Revealing detailed cost information to the network members improved the position of the supplier within the network Cost information sharing was believed to become common in the future 17

18 Customization and Activity-Based Costing Organization-wide ABC-model Cost effects of customization Costing tool for R&D 18

19 ebusiness Cost Analysis Leading IT wholesale distributor in Finland and Baltic region Important role of ebusiness Cost analysis of e.g. traditional order entry compared to web-based order entry Warehousing service cost estimation Cost structure of IT wholesaler Dynamic environment and the extremely narrow margins of IT wholesaler demand fast but accurate cost 19

20 Cost Management in High-Tech Environment Semi-conductor laser manufacturer Proactive approach to cost : Product profitability and identification of major cost drivers Activity-based costing model in an ERP system (Oracle) Process-based costing model for Accurate product costs Manufacturing process design and simulation Investment decisions 20

21 Other Research Interests R&D Management Customer Profitability Cost Estimation Life-Cycle Costing Cost Management in ERP and PDM systems 21

22 Uncovering the product profitability distribution 200 % 180 % 160 % 140 % 120 % 100 % 80 % Cumulative profit Cumulative turnover 60 % 40 % 20 % 0 % Most profitable models Least profitable models 22

23 Customer Profitability Total revenues from a customer Product Total cost of a customer Service Customerspecific cost Customer profit - Material - Direct labor - Financing - Warehousing - etc. - Distance (transportation) - Behavior - etc. 23