Cost introduction

Cost management means achieving maximum value with a minimum of waste.
It is important to have a flexible attitude in managing costs and increasing efficiencies. Flexibility means being able to respond quickly to both external and internal factors which may affect the profitability of the organisation.
In a competitive manufacturing environment any of the following may have an impact on costs.
Employee satisfaction
If employees are happy at work and understand and relate to the workplace culture, they will be motivated to participate in continuous improvement initiatives.
Customer satisfaction
If customers are not satisfied with the service and product provided by the organisation, they are likely to take their custom elsewhere.
Management of costs
In a competitive manufacturing organisation, employees know how to manage costs and this information is available for all to see. Skilled employees work as a team to improve production and process efficiencies.
Improved quality
Customer satisfaction increases when an organisation provides products of consistently high quality. This leads to increased sales and profitability.
Delivery
Delivering a product or service in a timely and competitive fashion will increase customer satisfaction resulting in increased sales and profitability.
In competitive manufacturing, employees are encouraged to implement their ideas for waste removal which will improve:

• process and production efficiencies
• customer and employee satisfaction
• quality.

This commitment to the removal of waste drives continuous improvement and the effective management of costs across the whole organisation.
Effective cost management requires a ‘whole of organisation’ effort. Each team has the knowledge and skills to remove the waste from its systems and processes, minimising the cost of its operations. Teams will produce:

• only to customer demand
• perfectly the first time
• as rapidly as possible
• just prior to when the customer wants the product.

The focus on cost must be balanced with other customer measures to prevent cost-cutting measures from adversely affecting the company’s quality and customer service performance.