total cost management division - imtma.in council/rcs/rcs mar 2019/tcm... · metal holding 30000...
TRANSCRIPT
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Total Cost Management Division
Total Cost Management
Division15th Mar 2019
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Total Cost Management Division
CII – Centres of Excellence
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1
43
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9
6
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7
1. CII TCM Division & Institute of Logistics, Chennai
2. CII Institute of Quality, Bangalore
3. CII- ITC Centre of Excellence for Sustainable Development, New Delhi
4. CII – Avanta Centre for Competitiveness, Chandigarh
5. CII Naoroji Godrej Centre of Excellence, Mumbai
6. CII Suresh Neotia Centre of Excellence, Kolkata
7. CII – Triveni Water Institute, Jaipur
8. CII - FACES
9. CII – Godrej Green Business Centre, Hyderabad
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Total Cost Management Division
CII – Sohrabji Godrej Green Business Centre Hyderabad, India
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Total Cost Management Division
CII- Sohrabji Godrej Green Business Centre
Inaugurated by Dr. A. P. J. Abdul Kalam, the then President of India on 14 July 2004
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Total Cost Management Division
Quality Speed
Results
Costs prices
Formidable Business Challenge….
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Total Cost Management Division
CII TCM Governance Structure
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Total Cost Management Division
CII TCM Division - Mission
“To enhance the cost competitiveness of the Indian industry through TCM
Movement”
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Total Cost Management Division
TCM - Activities
MSME clusters Maturity Model Rating
Advisory Services
Tools & techniques
Awareness
Conferences
Training
CII TCM Division – Service Verticals
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Total Cost Management Division
Cost Correction
Course Correction – Strategically designed business model
Responsive to “economic crisis” &“profitability challenges”
“Viable Business Model with Efficient and agile value chain”
“ Business & Cost” are intricately aligned9
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Total Cost Management Division
Changing Perspective of Profit
COST + PROFIT = SALES
SALES - COST = PROFIT
SALES -PROFIT = COST
In a sellers market cost and profits are reimbursed by the customer
▪ Multiple Players in the Market with Market determined selling price
• Focus is on cost control and reduction• Cost information is for tactical decision making
• Selling price is determined by market forces: • Profit is determined by the risk/return profile of
business • Focus on cost management to achieve the targeted
results
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Total Cost Management Division
Machine Tools Manufacturing – Unique Challenges
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Customer
1) Price Point
2) Customization
3) Precision
Market
1) Demand fluctuations
2) Lead time
3) Imports
4) Competition
Internal
1) Talent Pool
2) Price-Cost gaps
3) Capacity utilisation
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Total Cost Management Division
Profitability Dilemma in business12
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Total Cost Management Division
Market Context – Price, Cost & Profit
Competitive & Economic Challenges
Innovative Cost Structure Disruptive Cost Structure
Recessionary and Economic Challenges
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Total Cost Management Division
TOTAL COST MANAGEMENT
WHY?
WHEN?
HOW?
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Total Cost Management Division
Cost Management View
ACTIVITIES VA NVA AMOUNT
Melting time 80000 80000
Del cast wt 135000
135000
Metal Holding 30000 30000
Superheating 25000 25000
Rework on Q 35000 35000
Moulds hold up 30000 30000
TOTAL 335000
VA= Value Adding NVA = Non Value Adding
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Total Cost Management Division
Why do we need TCM?
Can we reduce
the prices
without reducing
the value?
How much do our
products cost us?
Which are our
profitable products and
what are the profits?
Which customer
segment is most
profitable?
Are our make or
buy decisions
right?
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Total Cost Management DivisionConfederation of Indian IndustryTotal Cost Management Division
• Customer Offerings
• Business Model DynamicsPortfolio
• Market driven
• Penetration PricingPrice
• Competitive cost structure
• Efficient Value ChainProfit
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Total Cost Management Division
Business Paradigm of Machine Tools for growth & profitability
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Cost Focus Importance Scope Cost Pressures
Cost Focus - Own Strategic Product customization Cost of Complexity
Lead time challenges Cost of extra resources
deployed
Quality Parameters Cost of quality
Product price Parity Price – Cost gaps
Cost Focus -
Customer
Strategic Re-work Re-processing cost
Precision / Accuracy Trials cost
Flexibility Cost of changeovers
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Total Cost Management Division
Is Cost your key ‘profit’ indicator?
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Total Cost Management Division
Where is your business on “Cost Barometer”?
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Total Cost Management Division
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Total Cost Management Division
Objectives of ‘cost maturity assessment’
❖To grade the company’s cost management
system into a 5 level hierarchy.
❖To evolve a certification process.
❖Develop Roadmap for the industry to emerge as
a cost leader
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Total Cost Management Division
CII TCM Model - Journey
❖ Conceptualized in the Y 2009
❖ pilot studies – 7 companies
❖ Participated by close to 75 companies as of now
❖ Across sectors – Auto, FMCG, Paper…..
❖ Across sizes – Rs. 100 crores & Rs. 50,000 crores turnover
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Total Cost Management Division
▪ First of its kind in the world and CII has an IPR
▪ Assessing the systems and processes
About the TCM Maturity Model ™
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Total Cost Management Division
International MOU’s
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Total Cost Management Division
➢ In an increasingly VUCA environment,
companies are under tremendous pressure
to improve profitability by 10-15%
➢A very comprehensive and disciplinedClosed Loop Total Cost Management
approach is required to;
a) Create competitive cost advantage
b) Adapt to the volatile market conditions
c) Sustain customer value
All rights reserved. 2
Global Business Challenges & TCM26
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Total Cost Management Division
“Changing Business Complexity – Enhanced Competitive Challenges”
Expanded Business Opportunities
Expanded Markets
Expanded Customer base
Expanded revenue
Expanded Production
Larger Product portfolio
Higher Risk incidence
Shrinking business share
Lower Customer loyalty
Sinking Profit
Lower productivity
Lower product Margins
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Total Cost Management Division
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Total Cost Management Division
Transform into –
“A World Class
Cost Management
Company”
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Total Cost Management Division
For businesses to get ‘cost & value right?...
NVA across the value chain?
Right product / customer profile?
De-risking business model?
Right product design (cost economical)?
Future cost challenges?
Course corrections through cost corrections?
Align functional roles with cost economical impact?
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Total Cost Management Division
Minimal
160-259
Functional
260-389
Operational
390-539
TCM Enabled
540-699
Exemplary
700-1000
Levels of Maturity Model Rating
Neither Tough, Nor Easy
Cost Leader
Cost Accounting
Standards
World
Class
Overall Rating: 1000 Points
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Total Cost Management Division
Level – 1 - Measurement
Level – 2 - Management
Level – 3 - Analytical
Level – 4 –
Viable Business
Level-5
Levels of Maturity Model - Hierarchy
Resource Measurement
Performance Metrics &
Benchmarking
Viable activities, Products,
Customers
Efficient Value chain
Resilient Business Model
– Identifying fault lines
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Total Cost Management Division
WHAT IS ASSESSED?
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Total Cost Management Division
Cost Information Maturity
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Hidden Profit & Hidden Cost
ApparentProfits
Costs
Revenues
HiddenProfits
Hiddencosts
Customer A Customer BCustomer A Customer B
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Total Cost Management Division
Cost Focus Evaluation36
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Total Cost Management Division
Total Cost Management is not a better product cost accounting mechanism
BUT it is a
A good understanding of costs
+
A good response mechanism to cost
+
A culture for analysing cost data
+
Ability to relate cost to strategy
Total Cost Management37
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Total Cost Management Division
CII Cost Maturity Model - Index
Business Strategy –
TCM alignment ERM – Cost
Impact
Product / customer mapping
R&D – Cost Excellence
Operational Efficiency
Supply chain efficiency
Environmental
Sustainability
Costing Function
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Total Cost Management Division
CII TCM Assessment - Approach
Sectoral and business
challenges
• Intensive study and analysis by CII
Enterprise level approach
• Through CEO & Functional head discussions
Milestones in the cost
competitive Journey
•CII TCM Report –Unique & customized recommendations
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Total Cost Management Division
Deliverables of Maturity Model ™
❖To identify the current level in the
Maturity model for the organization.
❖To develop a road map to progress
to the next hierarchical level in the
Maturity model.
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Total Cost Management Division
Signing up NDA – Non Disclosure Agreement
“To retain confidentiality for the data and systems of the
company”
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Total Cost Management Division
About the ReportFocus Area Scope
Strategy driven ‘cost
management’
CEO & Functional heads roles
Value chain focus Efficiency drive & cost structure improvement
Cost sheet (Reflecting
business process)
Algorithm, Structure, measurement, stake holders, review & decision
tool
Product / Customer cost
correction
Business Viability improvement
Cost maturity
improvement
Culture, System & Strategy dimensions in business
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Total Cost Management Division
TCM Maturity Model Benefits:
• Reconfiguring Product / Customer portfolio
• Viable product design
• Value chain corrections
Enabling Strategic Decision Making
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Total Cost Management Division
CII TCM Maturity Model Benefits:
❖Measurement systems - Robustness
➢ Re-engineering the cost sheet
➢ Cost corrections for better profitability
❖Value chain of business
➢Visibility of costs – Mapping, Correction, Reporting & Decision support
systems
➢Measuring and driving efficiency through course corrections
❖Building resilience into business model
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Total Cost Management Division
Approach
Ownership
Create transparency of true spend by cost category and functional area1. Visibility
Closed Loop
ForSustainability
2. ValueTargeting
Identify and quantify savings levers to drive reductions in spend
4. Blueprint& Execute
5. ControlMonitori3. Category
Ownership
Instill organizational accountability for cost performance
4. Blueprint & Execute
Develop & execute detailed cost reduction projects to capture value
5. Control & Monitoring
Implement tools & processes to develop sustainable cost management capability
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1.Visibility 2. ValueTargeting
3. Category
TCM - Full Visibility Of costs for improvement
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Total Cost Management Division
Model - Process
Introduction
Signing up NDA
Visit & Submission of Questionnaire
Receipt of Questionnaire
Plant Visit
2 Days Assessment by CII Team
Report Submission
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Total Cost Management Division
Module Wise Scores
TCM Maturity Model Questionnaire : Scoring Pattern
No. Frame Work Score
I Formulation of Business strategy & Integration of TCM 110
II Aligning risk management with cost information 100
III Mapping of strategic product / customer segment in TCM 100
IV New product design 90
V TCM & Sustainability 100
VI Operational improvements and its integration with TCM 120
VII Maturity of cost accounting process 210
VIII Cost Centers 50
IX Integrated Information System enabled TCM 100
Working Cost Accountant team 20
Grand Total 1000
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Total Cost Management Division
Final Score – Pecking order
0
100
200
300
400
500
600
700
800
900
1000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43
Minima
l
Functional
Operational
TCM Enabled
Exemplary 3
7
21
13
3
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Total Cost Management Division
JSW Steel - Award49
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Total Cost Management Division
CII TCM Maturity Model® Rated Companies50
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Total Cost Management Division
Auto & Auto
Ancillaries
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Total Cost Management Division
Steel & Cement Paper, Packaging
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Total Cost Management Division
Pumps, Equipment &
Engineering
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Total Cost Management Division
FMCG & Consumer
DurablesSugar & Agri-
Products
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Total Cost Management Division
General
Manufacturing
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Total Cost Management Division
Professional Charges (Specially made for IMTMA)
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Category Turnover Single
Plant
Multiple Plant
(In crores) (In Lakhs)
Category A (Small) Less than 100 2.25 5.75
Category B (Medium) 100 – 250 3.50 4.25
Category C (Medium Large) 250 – 500 4.25 5.00
Category D (Large) 500 - 1000 5.10 5.65
Category E (Very Large) Above 10000 6.80 7.30
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Total Cost Management Division
To Sum up
Today ‘world class TCM’ is not a choice. It is a necessity
for sustained growth and profitability
CII TCM Maturity Model rating is an excellent framework for
building cost competitive journey of businesses
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Total Cost Management Division
आभार.धन्यवाद |
THANK YOU !
For Further details;
M Nagesh BabuPrinicipal Counsellor
CII – TCM Division
+91 9849909683
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