Ideal Objects of Cost Management are Resources, Processes and Products
The interview was held with Prof. dr. Ronald Gleich, Professor for Management Practice and Control, Academic Director Center for Performance Management & Controlling, Frankfurt School of Finance and Management. Prof. dr. Ronald Gleich will give a lecture on topic Current State of Cost management in Middle Europe – First Results of a New Study on
CONTROLLING CONFERENCE, May 26th 2021.
1. Can you briefly explain the key aspects of cost management?
Cost management is the use of information to influence costs in the company. The main task of cost management can be divided into 3 areas:
- Influencing the cost level
- Influencing the cost structures
- Influencing the cost behavior.
2. At what levels in the company is it recommended to establish cost management?
Ideal objects of cost management are resources, processes and products. With these, a large part of the costs in the company can be analysed and managed. A direct link to the customers is also guaranteed via products. Suppliers are included in the cost considerations via the resource view.
3. What successful cost management tools and concepts could you highlight in particular?
If we stick to the logic just explained, product-related target costing or life cycle costing are excellent tools. Target costing is a concept of market-oriented cost management that can be combined very well with life cycle costing.
At the process level, the use of activity-based costing or cost benchmarking is recommended. With regard to resources, one can work very well with classical budgeting or zero-based budgeting to analyse and influence costs.
So there is a variety of cost management tools for the controller.
4. Can you give a recent example of good cost management in a crisis?
Almost all large German companies have launched successful cost management initiatives as a result of the Covid 19 pandemic or due to radical industry transformations like in the automotive industry. Three DAX-30 companies can be mentioned as examples: Daimler, Bayer or Continental. These 3 companies have launched and implemented successful cost management initiatives.
5. What do you think, what changes and requirements in the field of cost management are expected in the future (in terms of application of new concepts and professional competencies in organizations)?
Intelligent cost management should be designed as shown in the following slide. At the core should be the business model, i.e. products, processes and resources, and its cost-related optimisation. It needs a central guiding idea for cost management initiatve, its support by the management and the employees, a logical connection of the goals of cost management with the incentive and reward system, as well as effective accompanying project controlling.
If you would like to know more about Modern Cost Management, join us on the 12th Controlling Conference, May 26th.
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