WhatIsCostManagement?WhatIsCostManagement?““ThepracticeofunderstandingwhatcausesThepracticeofunderstandingwhatcausescoststooccurandthenusingthatinformationtocoststooccurandthenusingthatinformationtoenhancerevenue,satisfycustomerdemand,enhancerevenue,satisfycustomerdemand,reducecosts,increaseproductivityandmeetprofitreducecosts,increaseproductivityandmeetprofittargets.”targets.”WhatIsCostManagement?WhatIsCostManagement?CostManagementCostManagementActivity-BasedCostingActivity-BasedCostingActivity-BasedManagementActivity-BasedManagement•Focusesontheoperationalview•Answersthequestion:“Whatcausescoststooccur?”•Activitiesdefinedatanoperationallevelforprocessimprovement•Focusesonthestrategicview•Answersthequestion:“Whatdothingscost?”•ActivitiesdefinedatastrategiclevelforcostassignmenttocostobjectsActivity-basedmanagementandactivity-basedcostingaresubsetsofcostmanagement....What’sInItForLocalOffices?What’sInItForLocalOffices?⬛SignificantfeegrowthinlargelyuntappedSignificantfeegrowthinlargelyuntappedmarkets:markets:•OtherBCpracticeshaveexperiencedexplosiveOtherBCpracticeshaveexperiencedexplosivegrowthincostmanagement-inbothlargeandgrowthincostmanagement-inbothlargeandmiddlemarketsectors:middlemarketsectors:❻Costmanagementfeesexceeded$10millionlastyear.Costmanagementfeesexceeded$10millionlastyear.⬛IndustriesripeforcostmangementservicesIndustriesripeforcostmangementservicesincludehealthcare,insurance,utilities,andincludehealthcare,insurance,utilities,andmanufacturing.manufacturing.WhyTheFocusOnCostWhyTheFocusOnCostManagement?Management?BrutalGlobalCompetitionIncreasingcustomerDemands/ExpectationsRapidlyChangingTechnologySlowingGrowth/WorldwideExcessCapacityValuePressureWhyTheFocusOnCostWhyTheFocusOnCostManagement?Management?HistoricallyCost+Profit=PriceToday&InThePrice-TargetProfit=TargetCostFutureSO....ValuePressure=CostPressureCostManagementServicesCostManagementServices◆ProfitabilityanalysisProfitabilityanalysis-products,customers,channels-products,customers,channels◆ProcesscostanalysisProcesscostanalysis◆Targetcosting/ProfitplanningTargetcosting/Profitplanning◆Activity-basedbudgetingActivity-basedbudgeting◆StandardcostsystemimplementationStandardcostsystemimplementation◆ProcesscostanalysisProcesscostanalysis◆TransferpricinganalysisTransferpricinganalysisTheCostManagementMarketTheCostManagementMarket◆Targetindustriesincludetelecom,utilities,manufacturing,Targetindustriesincludetelecom,utilities,manufacturing,healthcare,serviceandinsurance.healthcare,serviceandinsurance.◆AlthoughtargetbuyerstendtobechieffinancialofficersorAlthoughtargetbuyerstendtobechieffinancialofficersorcontrollers,usersoftheendproducttendtobebothfinancialcontrollers,usersoftheendproducttendtobebothfinancialandoperationalpeople.andoperationalpeople.◆Typicalengagementsizeisbetween$100,000to$300,000;Typicalengagementsizeisbetween$100,000to$300,000;somepilotjobscanbedoneforless.somepilotjobscanbedoneforless.TheCostManagementMarketTheCostManagementMarket◆CostmanagementserviceshaveexpandedbeyondtheCostmanagementserviceshaveexpandedbeyondthetraditionalmanufacturingclients.Firmwidecredentialstraditionalmanufacturingclients.Firmwidecredentialsinclude:include:◆AmericanExpressAmericanExpress◆AT&TAT&T◆BellSouthBellSouth◆DeltaDelta◆GTEGTE◆Hewlett-PackardHewlett-Packard◆MolexMolex◆M...
