Cost reduction is the eternal theme of enterprise management, but this problem is now very important and urgent, especially for China's compressor industry entering the era of low profit. The more nervous, the more can not be blind. In cost reduction management, enterprises often have some phenomena, such as paying attention to one thing and losing the other, settling accounts after autumn, relying too much on finance, no quality persistence, ignoring the interests of suppliers, pursuing superficial fashion, etc., which will weaken the effect of cost reduction and even bring cost reduction into misunderstanding.
In the process of actual cost reduction, enterprises sometimes have the phenomenon of eager for quick success and instant benefit, killing the chicken to get the egg, which must arouse our vigilance. The misunderstanding of enterprise cost reduction mainly includes the following aspects:
Misunderstanding 1: vague understanding of the concept of cost
Many people believe that cost is the manufacturing cost of products, and cost control is to reduce the manufacturing price of products. From the statement level, cost is indeed the operating cost in the income statement, but in terms of cost control, the direct manufacturing cost of products is only the lowest level cost, and the space for its control is very limited. For example, the value chain of compressor includes not only the internal value chain formed by the internal business links of the enterprise, but also the vertical value chain formed with upstream and downstream partners such as main engine factory, motor factory and frequency converter factory. Each activity in the value chain has its own cost structure, so to analyze the cost is to investigate the cost in these activities. Therefore, the cost includes not only the operating costs and operating expenses from the statement level, but also the management costs such as decision-making costs and hidden costs from the perspective of management. From this perspective, the scope of cost control should be large cost, so we should calculate more cost accounts.
Some parts of the compressor can be self-made or purchased. The difference between the two is the difference cost in the decision-making cost. In order to strengthen the core competitiveness of the enterprise, Shaangu power, an industry star enterprise, has given up business links such as tooling, tool manufacturing, wood mold manufacturing, transportation business, material preparation and blanking, conventional processing and manufacturing since 2006. In 2010, the company gave up the casting business. This subtraction alone can save more than 19.5 million yuan a year. 18 non core business manufacturing terminals have been cancelled or weakened in total; Reduce nearly 1400 people; At the same time on the server; At the operation end, 18 new businesses were added and strengthened, and more than 2000 employees were added.
Myth 2: blind price reduction of procurement cost leads to the decline of raw material quality
Some enterprises unilaterally pursue the lowest cost in the procurement process, resulting in low price and low quality of raw materials purchased. If the cost optimization is indeed achieved in the procurement link alone, but the cost of the production link increases, the cost of the sales department increases and the customer satisfaction decreases due to poor quality raw materials, summarizing these problems, we will find that the cost of the whole value chain is increasing.
What's more, due to the decline of purchase price, raw materials are shoddy, leading to quality accidents, which leads to the damage of the company's brand, and the gains outweigh the losses, that is, there is no wrong sale, only wrong purchase.
Myth 3: one sided view of cost advantage as simply reducing production costs
Most managers will naturally understand cost as production cost, and limit cost reduction to the process of production activities. In fact, in the compressor industry, the production cost is only a part of the total cost, accounting for about 70%, and a considerable part of the cost comes from technology R & D, marketing, consumer services and other fields, but they are often paid little attention in cost analysis.
Myth 4: regard cost reduction as the lowest cost in all links of the supply chain
The supply chain is around the core enterprise, through the control of information flow, logistics and capital flow, starting from the purchase of raw materials, making intermediate products and final products, and finally sending products to users by the sales network. Some managers believe that enterprises should pursue the minimization of expenditure costs in all links.
Supply chain is a system composed of a series of value-added activities that enterprises depend on each other. The costs of various links affect each other, and sometimes even fluctuate. Therefore, we should bring opportunities for cost reduction through the mutual coordination and optimization of various supply chain links, and pursue the optimization of the total cost.
Myth 5: each camp, regardless of the whole, costs rise and fall
When holding the annual meeting, we can often see such a scene: each business department reported its own business indicators. The procurement department said how many percentage points should be reduced in the procurement cost rate, the production department said how many percentage points should be reduced in the manufacturing cost, the after-sales service department said how many percentage points should be reduced in the after-sales service cost, and the marketing department said how much should be reduced in the marketing cost. However, we should recognize this fact: first of all, compressor enterprises are facing a market that tends to be completely competitive, that is to say, the prices of compressors and parts are relatively transparent. If the suppliers are forced to lower the prices, the other party can only reduce the quality of parts to meet the company's requirements, so the product quality will not be guaranteed. Secondly, the salary of employees is also relatively transparent. If you want to reduce the manufacturing cost, you are likely to hire new people, and the skills and efficiency of new people can not be guaranteed, which will also bury hidden dangers for product quality. Finally, since the purchasing department and the production department have reduced the cost, the after-sales service department must passively accept a large number of market returns and rework, so the after-sales service cost will rise. Therefore, although the goal of reducing procurement and production costs has been achieved, the costs have been transferred to the back-end department, and on the whole, the costs have increased. Therefore, we should understand that cost reduction should be the decline of the overall level, rather than the growth and decline of costs within the enterprise. Another example is trying to increase the market share and benefit from economies of scale, but producing products of various specifications, which increases the management cost and reduces the scale effect; The factory is located close to users to save transportation costs, but the production cost increases due to the dispersion of production. This is that when enterprises reduce costs, they often reduce the costs of different links in contradictory ways because of the lack of overall planning and their own business.
Myth 6: simplify cost reduction
Chinese enterprises usually have extensive management and low resource efficiency. Therefore, strengthening cost management is very important for enterprise profitability. Some people simply think that cost reduction is a sign of reform courage by drastically reducing institutions, streamlining manpower and reducing welfare. In fact, the true meaning of reducing costs is to improve the input-output rate measured in money, rather than blindly increasing the input-output coefficient or blindly reducing costs. However, it is a pity that many enterprises' cost management has entered a misunderstanding, especially in human cost management. The result can only be reverse elimination, bad money expels good money, and become a talent training base for peers.
Myth 7: ignoring the impact of product development and technology research and development on product cost control
Product design often takes into account the impact of market competition, user demand, factory production capacity and raw material cost. Once the finished product is finalized, 60% of its cost will be locked. In specific operation, the cost can only be reduced by improving efficiency and input-output ratio, and the effect is relatively limited. Therefore, enterprises should take the R & D cost as the primary link of supply chain cost reduction, comprehensively consider the design cost from the aspects of easy access to raw materials, maturity of production process, stability of production efficiency and convenience of product distribution, so as to make the enterprise cost leading strategy win at the starting line.
Myth 8: lack of perspective and planning for dynamic and comprehensive cost analysis
Through dynamic cost analysis, enterprises can predict the possible changes of cost drivers of value activities, and quickly take corresponding actions to put themselves in a cost advantage position. Ensuring the persistence of cost advantage and preventing competitors from imitating depend on the joint action of various factors to reduce costs. Product scale, systematic advantages and proprietary technology cost are more persistent than other cost drivers. The competitive advantage obtained through the interaction of multiple value chain links can make it difficult for competitors to imitate and enable enterprises to maintain a lasting cost advantage. Therefore, judging the effect of cost reduction cannot be limited to a certain time node. China is a large country in compressor production and application, but it is not a strong country in compressor. In each compressor subdivision application field, its head suppliers are mostly foreign brands. Medium and low-end compressor enterprises lack technology, brand and market position. They drift with the tide in the competition and are hungry for a while. However, medium and low-end compressor enterprises are the main body of China's compressor industry. On the premise that there is no major breakthrough in enterprise technological innovation and industrial upgrading, how to base on their own advantages, avoid weaknesses, break through the competition through efficient resource integration, and win competitive profits through benign cost decline, so as to create opportunities for further development, is a problem that the compressor industry must pay attention to and solve. Interpretation of the existing misunderstanding of reducing cost and increasing efficiency in compressor enterprises.