Strategic cost management

An Introduction to Strategic Cost Management (SCM)

Vance Chan Associates www.vancechan.com Introduction to SCM

©1998 Vance Chan Associates. Not to be reproduced without permission.

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The challenge

Rising costs are everyone’s concern…

Introduction to SCM

©1998 Vance Chan Associates. Not to be reproduced without permission.

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The challenge

In today’s economy, most companies must make fundamental changes to cost structure while trying to maintain growth
Slower revenue growth due to:
• Sluggish economy
• Maturing markets
• Increasing competition

Rising costs:
• Customers demand more value
• Materials and key components
• Logistics
• Need for regional and multinational marketing
• Salaries

$

Time
To keep these lines from crossing, CEOs must identify the levers they can
To keep these lines from crossing, CEOs must identify the levers they can use for maximum impact on cost and productivity use for maximum impact on cost and productivity
Introduction to SCM

©1998 Vance Chan Associates. Not to be reproduced without permission.

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The Strategic Cost Management concept

Strategic Cost Management (SCM) is a way to address cost concerns while preserving the key parts of the business

Top management establishes focus, sets the tone and makes the commitment

Willingness and ability to think differently

Cost decisions are made in a strategic context

Results
Results

Key employees recommend and implement the changes

Ingredients for Successful SCM

Introduction to SCM

©1998 Vance Chan Associates. Not to be reproduced without permission.

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The Strategic Cost Management concept

The main prerequisite is the willingness and ability to think differently...

Old thinking, old excuses

The SCM mindset

This is what we do

Why do we do that? What is the value-added?

This is how we’ve always done it

Why do we have to do it that way? Is there a better way?

The boss