A Need to have new Dimension in Cost Management

INTRODUCTION From the 1960s to basically today, it hasn’t changed a whole lot more, except for new approaches to strategy and process engineering. Most approaches to ‘strategy’ just quantified and clarified pre-existing notions of corporations competing for dominance against each other. The advances were incremental, in the application of sharper theories, models, metrics and data-crunching. Today, just like in 1920, the reigning ideology of business is competitive, linear, behavioral, measurable, and quantifiable. Set financial goals. Define organizations, processes and procedures in cognitive terms. Convert all resources to financially fungible terms. Define finer and finer levels of behavioral objectives. Put financial incentives in place. Install sensors to micro-measure results. Step back and watch the machine run, tweaking the cheese rations as necessary. What this view of business is NOT is everything that’s happening at the front of the chain—the technology-to-organization reality that drives all else. It does not recognize cross-corporate borders, fluidity, collaboration, transparency, humanism in any serious sense, community, ethics, politics and the economics of the commons. All of which are critical business issues today.. We are stuck with a belief system rooted in the late 19th century. Hamel(2009) when at his best, is arguably the most creative business strategist extant; and here he is very, very good. He reports out the results of a 2008 group brainstorming exercise aimed at nothing less than re-inventing management from Management 1.0 to Management 2.0. THE PROBLEM There is a need to cultivate a new sight for the cost and financial management But in practicality looking good season despite the economy and not enough light appeared. There looks Failure due to increased production costs and profits are less. There are people with less purchasing power in general. It is not the solution to economic problems. It visible the Central Government’s lack of decision power as specially after the decision of the 2 - G a scandal, Central government's decision clearly is not found. It is not the responsibility of that higher official. It looks “PALAYAN VADI” attitude. It leads the economy in wrong direction. So there is a need for new dimensions in cost management to save the INDIA. This is the first to know that the Successful and productive activity as a rule when people have that credibility, Agriculture, economic affairs, banking and import - export etc.are in need of the significant attention to reduce the cost of production. The speed does not appear to any matters the decision. Speed up the sides, the decision must not be exploited. The biggest problem is unemployment. Under the employment generation rate is currently only one. Service sector employment growth finds that the young educated class is so dissatisfied with the recruitment section of closed government. New recruits are not without some technical posts like railway. No significant recruitment of railway is found. Yet it is the most important department of our economy. Thus, in the last 15 years, many other areas where there is very little chance of employment for the youth category. However, new recruits are in the field of Information Technology. Although it’s overall picture is satisfactory but this is an exception, not the exception. The same situation is seen in the price sector. Issues relating to civil aviation taxes or issue, The Prime Minister, Dr. Man Mohan Singh can not control over the situation. Anything like it, but the prime minister had a status of the person, if not own honor, then what is the meaning? This is a normal thing. The biggest challenge is the growing cost burden to the economy. Because the indirect costs - taxes and energy costs continue to increase. Food – or even not fuel and tax costs are also never decrease. Although the production costs continuously rising Food items also increased the nation, yet the product is not cheap.Central government of persons is comprised of government failure. No people or no minister are satisfied with the Department of foreign capital, import – export, commerce ministry, but they does not appear to influence the administration and efficiency. The only work is done being Petrol - diesel fuel price rising and yearly subsidy frequently decreased. It is intended that this provision is associated with the international economy. This is only the question of economic management and that the lack of ability. This is the situation which every Nation in the world is facing. However, some finds a way to catch someone in every respect. Although many of these countries are small So they can ritanum management. Each nation is not looks it lightly. TOP SEVEN IDEAS TO REDUCE THE COST Hemal (2009) has given seven steps for reducing the costs 1 Ensure the work of management serves a higher purpose 2 Reconstruct management’s philosophical foundations 3 Reduce fear and increase trust 4 Reinvent the means of control (less compliance, more shared values) 5 De-structure and dis-aggregate the organization 6 Create a democracy of information and 7 “higher purpose" and "philosophical foundations" and you get glazed looks in most Companies. NEW MODEL OF REDUCING THE COSTS Every college and university in the United States is discovering exciting new ways of using information technology to enhance the process of reducing the cost of production. For most institutions, however, new technologies represent a black hole of additional expense. Most campuses have simply bolted new technologies onto a fixed plant, a fixed faculty, and a fixed notion of classroom instruction. Under these circumstances, technology becomes part of the problem of rising costs rather than part of the solution. In addition, comparative research studies show that rather than improving quality, most technology-based courses produce learning outcomes that are simply “as good as” their traditional counterparts—in what is often referred to as the “no significant difference” phenomenon.By and large, colleges and universities have not yet begun to realize the promise of technology to improve the quality of student learning and reduce the costs of instruction. THE REPLACEMENT MODEL The key characteristic of the replacement model is a reduction in meeting time, replacing (rather than supplementing) face-to-face time with online, interactive learning activities for the co-workers. The assumption is that certain activities can be better accomplished online, either individually or in small groups, like in a class. In some cases, out-of-class activities take place in computer labs; in others, they occur online so that related people can participate anytime, anywhere. One version of the replacement model replaces some class meetings with online activities while keeping in-class activities more or less the same. Others replace some class meetings with online activities and also make significant changes in what goes on in the remaining class meetings. Rather than assuming that face-to-face meetings are the best setting for student learning, these projects have thought about why (and how often) classes need to meet in real time and the content of that meeting in relation to the desired learning outcomes. A NEW PRODUCT-MIX DECISION MODEL This is a new product-mix decision model that uses activity-based cost information. This new model is proposed to be used with the TOC philosophy in order to improve the financial performance of a company. Four case studies, all of which are based on hypothetical data, are prepared in this research to show the applicability of the proposed model in different manufacturing environments. Specifically, the first case study shows that the conventional product-mix decision model and the model developed in this thesis can give significantly different results regarding the best product-mix and associated bottlenecks of a company. The second case study demonstrates the use of the proposed product-mix decision model in a complex manufacturing environment. Specifically, this case study shows how companies should consider alternatives such as activity flexibility and outsourcing to improve their profitability figures. The third case study is an extension of the second case study, and it is prepared to illustrate that the proposed model can be extended to include more than one time period. The final case study demonstrates the applicability of the proposed model in a lean manufacturing environment. Using the proposed model developed in this research will give managers more accurate information regarding the optimum product-mix and critical bottlenecks of their companies. By applying the TOC philosophy based on this information, managers will be able to take the right actions that will improve the profitability of their companies. Specifically, they will be able to observe the effects of several alternatives, such as activity flexibility and outsourcing, on the throughput of the whole system. In addition, the proposed model should help managers to prevent making decisions that sub-optimize the system. This may occur, for example, when using only the most efficient methods to produce each product even though the capacities of these methods are limited and some other less efficient methods are currently available in the company. By extending all the model to include more than one time period, managers will be able to estimate the potential bottlenecks and the amount of idle capacities of each non-bottleneck activity performed in the company ahead of time. This information is powerful and can give companies a substantial advantage over their competitors because the users of the new model will have enough time to improve the performance of their potential bottlenecks and to search for more profitable usage of excess capacities before the actual production takes place. NECESSITY CONSTRAINTS INNOVATIONS Typically, companies respond to these constraints in one of two ways. The first is to postpone engaging with these emerging markets until they look more like their developed counterparts. This “wait-and-see” strategy comes with an obvious drawback: competitors might establish themselves in these markets and create barriers for new entrants. Moreover, there is no guarantee that these economies will evolve to look the same way as the now-developed economies, so the wait-and-see strategy may be self-defeating in the long run. The second option is to ascertain how other companies have succeeded in these markets and learn from their best practices. Call it Darwinian, but companies can gain competitive advantage by exploiting the very constraints that others find daunting. When companies fail in the Indian market, they often blame their difficulties on either external constraints like power shortages, high costs of transportation, and talent shortages that affect their operations, or on issues stemming from poor access to products and services that affect their customers. Figure 1 shows how a set of constraints can compromise shareholder value. Companies can identify the right approach for innovation by analyzing their constraints, as shown in figure 1, and then identifying unique innovation opportunities to improve both efficiency and responsiveness. Have internal efficiency improvement initiatives failed to build competitive advantage or grow revenues? Are there customers who want products and services not being supplied by competitors? If the answer to such questions is “yes,” then it is probably time to start paying more attention to external constraints. Companies essentially have four options when trying to innovate and build a competitive edge, based on whether external constraints affect the company or its customers, and whether the firm can gain an edge over competitors by improving products or processes (see figure 3). Each of these options offers the possibility to move to a new frontier on the efficiency-responsiveness map. If firms manage to cover multiple options in this matrix, they may develop a business model that will be difficult for competitors to replicate. Figure 4: Metrics to make a constraint-driven strategy work Process Design Collaboration New product and service development Service Delivery model Energy efficiency Increase in throughput/reduction in energy costs Talent acquisition effectiveness Revenue earned by employees/(employee acquisition and training cost+ education institute relationship building cost) New customer segment share Sales to new customer segments as percentage of total sales Service delivery effectiveness Revenue from new service /new service delivery cost Distribution effectiveness Increase in revenue due to improved distribution/reduction in distribution costs Product development effectiveness Revenue from new product/(cost to develop new product* time to develop new product) Sales effectiveness to new customer segments Revenue from new customer segments/Cost to serve new customer segments New service delivery share Revenue from new service channel/Total revenues from the business New customer segment opportunity cost Potential revenue loss by not serving new segments CONCLUSIONS- However, companies cannot hope to operate alone; they have to collaborate with suppliers for certain critical aspects of their operation. This is particularly true of the automobile industry, another high-growth sector in India. For collaboration to result in timely and quality delivery, suppliers must have certain capabilities. When customers face constraints such as inadequate road connectivity or power shortages, or cannot find products at the quality and price points they want, companies can capitalize by creating new products and services. Most companies struggle to develop such innovative products in a cost-effective manner because they try to adapt existing technology or business practices for local markets. Companies that innovate and succeed in breaking the efficiency-responsiveness trade-off can open up hitherto unexplored markets.When customers face constraints in accessing goods and services, there could be opportunities to create new service delivery models. Hindustan UniLever, for example, markets its products through rural women and local people who travel door to door on bicycle.Process or product innovations developed in response to constraints in local markets may have the potential for application in global marketsInfrastructural bottlenecks and other constraints in emerging markets like India need not stop companies from entering these markets. On the contrary, they present opportunities to experiment with product and process innovations that could help companies benefit from the growth story now unfolding in these markets as well as prepare for an uncertain future. Innovating to convert constraints into competitive advantage in the now emerging markets can help global companies prepare for future challenges. Social media REFERENCES_ 1 Gary Hamel (February 2009)-“Moon Shots for Management”-- Harvard Business Review 2. Carol A. Twigg-“ Improving Learning And Reducing Costs: a speech as Executive Director of the Center for Academic concil. 3. h t t p : / / w w w. c e n t e r . r p i . e d u PewGrant/RD1Award/PSU.html) redesign of general chemistry at the University of Wisconsin at Madison (UW) 4. By Atanu Chaudhuri, Craig , Kumar Kandaswami and Shalabh Kumar Singh; Illustration by Josh Cochran—“ Necessity Breeds Opportunity,Constraints, innovation and competitive advantage-