Cost reduction methods. Methods for reducing the production costs of an enterprise

Cost reduction at the enterprise is a logical process in the conditions of economic instability. How to do it correctly? Step by step on effective methods to reduce the company's costs - later in the article.

You will learn:

What are the types and options for reducing costs
How to plan and implement cost reduction activities
What are the most effective ways to reduce costs in practice?
How material costs are reduced
What are the benefits of reducing transport costs
How Cost Reduction Strategies Are Chosen
What are the basic cost principles to consider

Classification of costs in the enterprise

Effective and ineffective. Efficient costs are possible (refer to obtaining income through the sale of products for the manufacture of which they were allocated) or inefficient (refer to tasks that are not related to generating income, involve losses). Among inefficient expenses, any types of losses are noted - due to marriage, theft, downtime, shortages, damage, etc. Therefore, you need to focus on reducing the amount of inefficient expenses. Therefore, it is necessary to establish permissible technological costs, determining liability in case of violation of permissible norms.

Another way to reduce costs is to analyze the effectiveness of auxiliary work with the involvement of outsourcing companies in some areas. Engaging third-party contractors on a competitive basis is a real and effective option to reduce the costs of medium and large organizations. Although sometimes it is more profitable to maintain your own units compared to attracting third-party organizations, this situation is no longer considered the rule, but the exception.

Relevant and irrelevant. Any leader needs to control whether control and planning depend on his managerial decisions. If they depend, then they are relevant in the number of expenses, otherwise they will be irrelevant. In particular, expenses during past periods are irrelevant, since the CEO can no longer influence them with his decisions. And opportunity costs are among the relevant ones, so management should pay special attention to them.

Constants and variables. Possible variable, fixed or mixed costs - depends on the level of production. Variable costs are directly proportional to the level of production, without affecting the constant production volumes, mixed costs contain both constant and variable parts. Due to this division, cost optimization is ensured - a particularly important condition for controlling fixed costs.

Direct and indirect. Possible direct or indirect costs, depending on the method of attribution to the cost of production. You can attribute direct costs to a particular type of product or service. In this category, the costs for the purchase of raw materials, materials, wages of production workers are noted.

Indirect costs are not directly related to a specific type of product. Indirect costs include the costs of managing and maintaining departments to manage and maintain the enterprise as a whole. If the enterprise is engaged in the production of only one product, then all the costs of its manufacture and sale will be direct.

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How to start reducing costs in the enterprise

The first step is to classify expenditures into clearly defined categories.

The second step is to determine which costs are subject to adjustments.

The third step is to plan and cut costs.

6 Ways to Reduce Costs

1. Reducing labor costs

The provisions of the current domestic legislation allow companies to reduce both the number of employees and wages.

2. Reducing the cost of materials and raw materials. To reduce the cost of purchasing materials and raw materials, the following enterprise steps can be taken.

– revision of the terms of contracts with existing suppliers;

– search for new suppliers;

– use of less expensive components whenever possible;

– helping suppliers reduce their costs;

- procurement of materials together with another buyer from one supplier;

– independent production of necessary materials;

- introduction of resource-saving technological processes that contribute to saving on the cost of raw materials;

– giving priority to the process of procurement of materials and raw materials;

3. Reducing production costs. Consider the questions that can be applied in evaluating the effectiveness of efforts to reduce costs:

1) Rental payments:

– is it possible for the company to renegotiate the terms of the current lease agreement?

Is it possible to move to another room or building?

– Is it possible to sublease part of the company's occupied space?

– can it be more profitable for a company to buy out a leased premises?

2) Utility payments:

– Is it possible for the company to have tighter control over the consumption of energy resources?

- Is there an opportunity for the company to implement more cost-effective processes?

– is it possible to switch to new conditions for payment of utility tariffs?

3) Equipment repair and maintenance:

– is it possible to postpone for a long or short time certain works within the framework of the current maintenance of the equipment?

– can it be more profitable for the company to refuse the services of contractors and repair the equipment on its own. Or will it be cheaper to attract a specialized organization if the company itself is engaged in ongoing maintenance?

– can the company come to an agreement with current contractors to improve the terms of the equipment maintenance contract in its favor?

– is it possible to search for new service providers for the company?

4) Integration and disintegration

– Is it possible to reduce the company's costs through vertical integration with suppliers or customers, or through horizontal integration with other manufacturers?

- Is it possible to reduce the company's costs by expanding the scope of its business to other parts of the production cycle, with the refusal to work with subcontractors? Or will it be more profitable to narrow the production area, part of the production cycle, or to carry out auxiliary work by giving way to another manufacturer?

5) Transport:

Is it possible to limit the number of company vehicles?

- can the option of transferring the functions of the trucking department to the outsourcing of the trucking company be considered?

- wouldn't it be easier to involve a logistics company (or a professional logistician) in order to consult on reducing transport costs?

How to optimize business expenses: instructions for the manager

- Are there any data that confirm - the compatibility of growth in advertising spending with an increase in sales.

5. Additional measures to reduce costs. Is it possible to reduce the company's costs in the following areas:

– conducting experimental design and research work;

- maintaining a wide product range;

– maintaining a certain quality of services provided;

- maintaining a wide range of its customers;

– mechanization of the production process;

– increasing the level of personnel qualification;

– careful selection of components and raw materials that meet certain technical parameters;

- the speed of order fulfillment;

- organization of production;

– maintaining the flexibility of the production process;

– maintaining the existing policy for the maintenance of machinery and equipment;

– support of distribution channels for manufactured products.

6. State support. Is it possible for a company to benefit from a certain government program to support entrepreneurship through the following actions:

– lobbying for the adoption of relevant federal and local legislation;

- receiving subsidies and benefits.

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What other ways are there to cut costs?

1. Reduced tax costs:

- to conclude an agreement with the IP.

- conclude contracts with legal entities. persons.

– to organize a holding structure operating under a simplified taxation system.

- Transfer management functions to a separate legal entity. face.

2. Reducing the cost of maintaining unused property:

- to sell the materials that were formed during the dismantling process;

- do not write off, but sell depreciated fixed assets.

3. Innovative cost reduction:

– introduction of more economical equipment and technologies.

- to develop low-cost production.

4. Reducing the costs associated with depreciation:

– transfer the property for repeated application of premium depreciation. The company has the right to write off up to 10% of the initial price of the fixed asset at a time as expenses of the current reporting period.

- reduce the period of use of the object by the time during which it was used by the previous owner for the purpose of depreciation.

– proof of the repair nature of the work instead of modernization and reconstruction;

– recognition of the redemption value of the leased property as an expense, if the object is accounted for by the lessor.

5. Dealing with debt:

– implementation in any cases of measures for the collection of debts.

4 methods to reduce logistics costs

Revision of the work of the logistics service. The logistics of the enterprise is built on the principle of "it happened", and not according to a pre-established plan. But even when organizing this work on the basis of a plan, according to experts, a quarterly review of the main functions in the department is necessary to determine whether any of them have lost their relevance.

Practice confirms that thanks to this review, many points of loss of time and money for the company can be identified.

Logistics audit succeeds critically. In particular, in the staff of one company there were several specialists who translated the same type of invoices for customs and banks. As a result of consultations with the broker and the bank, a glossary of frequently used words was handed over to customs, with the compilation of certain templates for translation, which made it possible to part with translators.

If you organize a logistics system in a company with a clear structure, understandable KPIs and control, these measures will allow you to get an immediate noticeable effect. Further, it is necessary to deal with the optimization of individual functions of the enterprise.

Inventory Management. It is necessary to calculate the required stock of warehouse stocks, the minimum safety stock, the volume of products that are in transit, with the development of delivery schedules and payment of invoices. This will result in a significant reduction in associated costs.

Transport planning. First of all, in order to reduce logistics costs, it is necessary to ensure the reliability of transportation in terms of time and safety of the cargo. Thanks to this, the vehicle can be used as a warehouse on wheels, with a significant reduction in overall storage costs.

In order to reduce transportation costs, it is important not so much to demand discounts from carriers, but to competently plan to reduce costs. It is noteworthy that the most effective option for reducing transport costs is loading in 2 years. Ranked 2nd in Efficiency – Keep downloads stable on schedule.

The right choice of logistics service provider. In that matter, you need to critically approach the "old attachments", conducting a constant study of available services and prices.

When summing up, it can be noted that in order to optimize logistics and reduce the corresponding costs, a systematic approach becomes the main condition. In a company in which a holistic system can be established, accustoming employees to constantly draw up plans, make decisions based on calculations, and not traditions, there is a daily improvement of processes, and periodic audits involve only minor adjustments, contributing to the success of the company. Experts from the School of the General Director at will tell you more about accounting and cost sharing.

First of all, you need to start with the optimization of the logistics department

Maria Isakova,

logistics expert, Moscow

In most cases, companies strive to optimize the part of logistics that is under the control of contractors. Often, at the same time, they begin such optimization with the transport component, negotiating with carriers and forwarders to reduce prices. But it can be clearly stated that it is impossible to achieve lower prices from carriers every time, and the effect of such a decrease is reduced. To ensure maximum results, the beginning of a policy to reduce logistics costs should be the optimization of the logistics department.

Sample Cost Reduction Plan

Cost reduction planning involves a set of measures divided by time:

Compliance with financial discipline. Measures aimed at maintaining financial discipline are being formed. In particular, a plan is being developed, with strict adherence to the approved data. Decisions made by the head and recorded in the budget can be violated only in exceptional cases.
Organization of accounting. To systematically reduce the costs of the enterprise, it is necessary to introduce a system of financial accounting and control. Not only costs are subject to accounting, but also the income of the enterprise. It is necessary to carry out operational measures aimed at recovering the debt. Also, the enterprise itself needs to promptly make budgetary payments, and payments for personnel and counterparties, which avoids penalties.
Development and implementation of a cost reduction plan. The goals of the cost reduction program are the maximum detailed target values of the cost items to be reduced. As part of these activities, it is expected to develop a plan for the entire enterprise with the identification of weaknesses where cost reduction is possible, and for each structural unit - to strengthen financial discipline in the field.
Carrying out inspections. In order to assess the effectiveness of cost reduction, it is constantly necessary to conduct independent monitoring, which will allow an assessment of the natural loss, possible shortages, technological losses, with the necessary adjustments to the plan to reduce the corresponding costs.
Loss analysis. Any result, including a negative one, should be carefully rechecked to reduce further costs. It is necessary to analyze production losses that force the sale of products (services) at reduced prices. Defects, alteration and marriage also deserve special attention. This not only leads to a reduction in the cost of production, but also to additional costs. Breaks in production, waiting for products can also cause an increase in costs.

What problems can arise during cost reduction

It is difficult to identify the most important cost items that require reduction. These errors are typical for medium and small enterprises, because usually their management is well informed about the most significant expenses. But companies, as they expand and become more complex, may find themselves in a situation where management may not notice the increase in spending in certain areas.
Incorrectly identified the source of the company's costs.
Along with extra costs, they lost their individuality, as a result of which the competitiveness of products, especially if its distinguishing feature was quality.
Seriously spoiled relations with parties involved in the business
Reduced costs in important areas below the allowable limit.
Misunderstanding of the cost mechanism of the enterprise.

No motivation

Konstantin Fedorov,

Development Director, PACC, Moscow

When implementing cost optimization, enterprises usually use administrative leverage according to the principle “if you don’t cut costs, we’ll fire you.” Because of this, a situation arises when ordinary employees and managers of the company begin to sabotage changes explicitly or openly. Moreover, many see optimization as a sign of weakness in their leadership.

Advice. It should be agreed in advance how the company will thank all participants in the cost reduction program after its implementation. However, this gratitude does not have to be financial. In particular, you can think about career promotion or other options.

Keep track of costs and they will be less. Sometimes you can achieve cost reductions simply by taking them into account and understanding them.
Your employees are your associates. Educate your employees on the importance of cutting costs. They need to explain that you appreciate their proposals aimed at reducing costs.
Sort your costs according to the degree of dependence on production. Accounting systems are mostly divided into variable and fixed. Variable costs (direct labor costs, raw materials, etc.) depend directly on the volume of output. Fixed costs (travel expenses, salaries for management personnel, bills for water, heat and energy, etc.) usually do not depend on production volumes. Some companies have adopted a classification of variable costs, depending on the ease of their adjustment when changing production activity.
Divide costs according to how easily they can be adjusted using alternative solutions.
Keep track of not only the cost structure, but also the causes. This makes it possible to take the necessary measures aimed at eliminating the causes of undesirable cost increases.

Planning and cost control - from prices to energy consumption

Walter Bory Almo,

General Director of the Ufa Meat-Packing Plant

Our planning and finance department processes all available information to plan and control costs - from ingredient prices to equipment performance and energy consumption. Continuous analysis is the basis for further cost reduction. We divide the costs in our work into 2 categories - for some, significant investments are required, in the case of others, simple procedures will be enough. Do not give up on simple solutions, thanks to which you can achieve tangible results with minimal spending.

To analyze the results, we use the KPI system of key performance indicators. The data is compared with the results of five companies in our holding. It is not always possible to achieve results thanks to this information, because we are in the lead in many indicators. Therefore, a collection of our competitors is also being conducted.

We also involve employees in our work to reduce costs. For any employee, thanks to whose idea it was possible to provide a tangible economic effect, a bonus of 3 thousand rubles is allocated.

Information about the author and company

Maria Isakova, logistics expert, Moscow. She started her career as a logistics manager for Bayer. In 2001-2008, he was the head of the logistics department, since 2009 he was the head of the logistics and order management department at Lanxess.

Walter Bory Almo, General Director of the Ufa Meat-Packing Plant. JSC "Ufimsky Meat-Packing Plant" is one of the leading enterprises in the meat-processing industry of the Republic of Bashkortostan. It produces more than 150 types of food and technical products, as well as raw materials for the leather and medical industries.

Zoya Strelkova, Leading Financial Analyst, Head of the "Economics of the Company" direction of the "Training Institute - ARB Pro" group of companies, Moscow. He specializes in the study of the economic condition of companies, the development of economic business models, strategic planning and other issues. Participated in the implementation of more than 20 strategic planning projects for enterprises in various industries. Conducts seminars “Strategy of everyday life. PIL Approach” and “Finance for Managers”. “Training Institute – ARB Pro”. Field of activity: business training, HR consulting, strategic management, business information support. Form of organization: group of companies. Territory: head office - in St. Petersburg; representative offices in Moscow, Nizhny Novgorod, Chelyabinsk. Number of employees: 70. Main clients: Moscow Financial and Industrial Academy, Sberbank of Russia, Gazprom, Irkutskenergo, Svyaznoy, Ecookna, Coca-Cola, Danone, Nestle2.

Konstantin Fedorov, Development Director, PACC, Moscow. CJSC "PAKK" Field of activity: consulting services, professional assistance to business development. Number of employees: 64. Average annual turnover: about 110 million rubles. Completed projects: more than 1000.

production costs is the cost of acquiring the factors of production used. The most efficient production model from an economic point of view is the one with which it is possible to reduce production costs. They are determined by the expression of the value of the expenses incurred.

The economic essence of costs is based on the problem of limited resources and alternative use, i.e. the use of resources in this production excludes the possibility of using it for another purpose.

Selecting the most acceptable version of spending productivity factors and reducing its costs is one of the main tasks of businessmen.

Internal (implicit) costs are the costs that a company pays by using its own resources on its own.

The sums of money spent by the company for contractors (work, fuel, raw materials) are called external (explicit) costs.

Types of production costs

Economic costs are the economic costs forgone by the entrepreneur at the time of production. These include: resources, company purchases, company resources, market turnover not included.

Accounting costs are miscellaneous payments made in order to acquire the necessary factors for manufacturing. Accounting costs are the actual costs incurred to purchase sources from external producers. They are divided into direct and indirect costs. The costs that were spent only during the manufacturing process are direct costs. Indirect costs are called costs without which the company could not function - indirect costs.

Opportunity costs are the costs of creating products that the company for some reason does not intend to produce. Costs that could exist but are missed are opportunity costs. Costs contribute to an increase during the rise in the magnitude of production. They are an indicator of the optimal size of production in the current conditions, because it is clear to everyone that production will not expand indefinitely. The costs can be divided into:

Fixed costs (FC) are the costs that a firm will incur regardless of the volume of production. This type of cost includes: property taxes, money for equipment, wages, rent.

Variable costs (VC) are those costs of enterprises that change if production increases. These include: wages of hired workers, taxes and VAT, transport services, raw material costs, etc.

3 KPIs for production that work without losing quality

How to determine production costs

Total costs (TC or C). They can be determined by the following formulas: TC = FC + VC and TC = f(Q).

Average fixed costs (AFC)- AFC = FC/Q, where Q is the number of manufactured items.

Average Variable Cost (AVC)- the amount of variable costs that comes per unit of output that the company produces. Formula: AVC = VC/Q

Marginal Cost (MC)- the cost associated with the production of an additional unit of output. Can be calculated using the following formula: MC = ∆TC / ∆Q = ∆VC / ∆Q.g8g

How to reduce costs by optimizing production waste

There are not so few ways to make money on production waste if two conditions are met: strict accounting of waste and their prudent use. In the article of the electronic magazine "General Director" manufacturers of completely different goods - windows, down jackets, flour, confectionery, electrical systems - talk about the experience of waste disposal.

How to keep track of production costs

The costs brought together with the process of transformation of trading activity are distribution costs. They can be divided into those that are closely related to the progress of production in the functioning of circulation and those that are caused by buying and selling. Costs are deduced from the costs observed during the movement of goods to the buyer and the costs associated with the development of products, production and sales of goods in public catering establishments.

Articles of distribution and production costs:

Transport services.
Employee wages.
social need.
Rental and equipment costs
Depreciation of fixed assets.
Repair expenses.
Packing and sorting of goods.
Promotion costs.
Interest rate of loans.
Loss of waste equipment.
Fuel consumption, gas, electricity

Operating account associated with production costs:


Depreciation of fixed assets
Exploitation of goods
Cash spending by businesses
Credit expenses of enterprises
Tax debts
Deductions for social insurance and provision of company employees
Salary to employees
Costs included in the transportation costs of circulation
Shortage of goods
Surplus in cash
Shortage previously accepted at the expense of trading enterprises
Distribution costs, which are written off to the sales account at the end of the reporting period

Rules for Effective Cost Control

Costs will be less if they are taken into account. For example, a company can monitor phone calls to reduce telephone costs. Employees will stop calling on personal matters and then the costs will decrease.

The team at work should strive for a common goal - to reduce the company's expenses. By having a conversation with employees about the importance of reducing costs, you can get advice on how to save money.

It is necessary to systematize personal costs depending on the volume of production. Costs are divided into fixed and variable. It is possible to systematize variable costs depending on how easily they can be adjusted when the activity in production changes. Real spending on materials, for example, increases or decreases in response to changes in production volumes. And by reducing the staff, reducing salaries, it is possible to correct labor costs. But direct labor costs can be corrected only if the company's management can take appropriate measures (staff reduction, salary reduction, etc.). On the other hand, the management of the company will hardly be able to reduce the cost of renting the premises if there is a decline in productivity.

Try to track not only the structure of expenses, but also the reasons for their appearance in the enterprise. If you eliminate the cause of the unpleasant increase in costs, you can eliminate the costs themselves. For example, when hospitality costs are high, find out why the firm is spending a lot of money: to increase the client base, during which the number of successfully concluded contracts grows, or because there is no control over the expenditure of hospitality funds.

Optimizing Cost Management: 7 Rules for Dealing with Costs

Ways to reduce production costs

Optimization of production costs

1. Warehouse logistics. Often the reserves with which you can reduce costs are located there. In particular, old raw material quality control equipment is often used. There were cases when raw materials were accepted with parameters that did not meet the requirements of the technology. Subsequently, the production process was disrupted, and the cost of energy and the use of raw materials increased. If you purchase new equipment, you can get both cost reduction in production and efficient work with suppliers.

At various enterprises, due to the fact that there were not enough warehouse workers and the time was limited to unload the wagons, the wagons with raw materials were not weighed. As a result of the checks, it was found that the underweight was about 10%, and the supplier was to blame. Bottom line: losses at the enterprise from the volume of purchases were greater than from the wages of employees.

It also happens that raw materials can be in the open air. Raw materials lose their chemical properties and technology is violated during production. This problem increases the amount of raw materials that are required at the time of manufacture and causes an increase in the use of other resources, such as electricity. You can also get defective products.

2. Transport logistics. Internal (moving around the territory of the enterprise) and external logistics of the enterprise (delivery of raw materials or finished products) is often poorly organized! Managers often face the problems of inefficient use of the vehicle.

For example, the company organized work with clients, determined the smallest volume of sales, but did not discuss the smallest volume of delivery. The volume of deliveries is very important, because the price upon delivery can significantly affect the income from the order.

The problems that are associated with suboptimal movement of raw materials and unfinished products are internal logistics. For example, raw materials were unloaded for incoming inspection, then they were transported to prepare them for production, and later they were transported again to get to the workshop. As a result of the following disorganized logistics, the company incurred costs and lost raw materials during immersion and transportation.

In different companies, the costs that were spent on transportation were reduced, but at the expense of not very obvious solutions. So, in one company, drivers could go to lunch in working cars. And no one cared. The fleet mainly consisted of trucks and tractors, so the cost of such lunch trips significantly increased the costs in the firm. In this regard, the company's executives purchased a minibus, with which they could take employees to lunch. Here's an easy way to cut costs.

3. Purchasing. Despite good bidding procedures, this will not lead to automation of procurement costs. Not only corruption is to blame for this, which, say, has not been completely eradicated anywhere. The essence of the problem often comes from the organization of the process, and if it is revised, it is possible to obtain a reduction in costs. Let's see the possible changes:

Elimination of excessive formalization. It happens that with the maximum regulation of procurement control, the result is not high. The whole essence of the purchasing department leads to the usual collection and recording of papers. But after all, the most important essence of the work of employees is to find a good supplier and conclude an agreement with him. In large firms, each meeting of tender committees amounts to 15 or more purchases. From this it is clear that procurement service employees take a lot of time to prepare a tender and analyze suppliers. But a detailed development of each purchase is impossible due to lack of time.

Not many purchases can be analyzed in detail. The main point is to determine the suppliers that are a priority for the company, because they can provide the bulk of the supply with good conditions. Finding alternative suppliers eliminates the risk. At the tender, you can raise the question of the most good or not very good suppliers and approve the conditions for working with him. Whose conditions will be more favorable, those suppliers will be chosen.

Improved coordination between production and technical services and the purchasing service. When technical departments and purchasing services work together, cost reduction can be achieved. Determine the required change in production indicators and submit other variations according to the requirements for materials, components. This action will help in planning, choosing suppliers, helping to find out the best price and quality while optimizing costs.

Independent assessment of current conditions of work with suppliers and search for potential suppliers. An independent company can conduct an analysis of the market situation and find suppliers. At the initial stages, an open source is analyzed in order to compile a complete list of potential suppliers and determine the general price level. Next, it is necessary to negotiate with some potential suppliers about possible prices and conditions of purchases. This will show senior positions in the firm a new tender campaign and invite a wider audience. In this situation, you can find that the company can buy material much lower than before.

Practitioner tells
Vadim Afanasiev, Leading Analyst of ZAO Samara Oxygen Plant

In recent months, we have become much more attentive to work with suppliers, we carefully analyze the prices of purchased materials, especially since the cost of many resources has decreased.

We have very complex logistics: both small and large-tonnage transport is used. For transportation and storage of liquid products, we use rail transport, as well as many mobile and stationary tankers. In addition, due to physical laws, liquid gases cannot be stored for a long time, and their losses are irreversible. Therefore, we are now paying great attention to optimizing logistics and storage. We calculate everything to the smallest detail. A clear sales forecast, the production of the most accurate volume of products, optimal delivery - we save a little everywhere, but on the scale of the enterprise it is millions.

The state gave business a "gift" in the form of an increase in electricity tariffs. Therefore, it is necessary to deal with energy efficiency issues. We carefully analyze the operation of all equipment. For example, our production uses air separation units, the optimization of which has already resulted in a significant reduction in electricity costs.

We also try to save on business trips. We go only if it is really necessary and the solution of the issue requires the presence of our employee on the spot. Instead of air travel, we use railroads.

4. Production. Considering that a large number of companies are reducing or stopping investment projects, we advise you to focus on the direction that can reduce costs at the time of production, excluding accounting for your own investment.

Implementation of lean manufacturing tools. It makes no sense to dwell on the method of lean manufacturing. I would like to note that during practical actions it gives a significant economic effect, but its implementation may take a long time. This situation is connected with the fact that the result of the reduction in this situation does not occur instantly, but is achieved during production changes in the culture of the staff.

Effective accounting and control of the use of inventory and waste. Implementation of an effective inventory and waste management system is aimed at reducing costs through more efficient use of them. In most Russian enterprises, the volume of waste and control over their use are poorly taken into account. At the same time, the value of such waste can be significant, even compared to the cost of finished products, and many industrial wastes are converted into products that are in demand with little processing.

Management expenses

Management costs are mostly fixed, most of which are direct costs - employee benefits, bonuses. These costs are the main factor in the growth or reduction of some other costs in management: due to the growth in the number of workers, rents and transport services may increase. To keep management costs as low as possible, you need to manage employee costs.

1. Reducing costs without reducing the number of employees. Cutting costs without laying off employees seems to be the most preferable option for many companies: it allows you to keep employees in the company and not worsen the corporate culture. The only caveat is the short duration of the effect achieved.

The potential for layoffs lies in several areas:

reduce administrative and transport, travel and rental costs;
cut wages, the cost of medical insurance, the cost of corporate parties, a review of the daily routine.

All of the above actions can solve the issue of reducing costs without laying off employees.

2. Change in organizational structure

One of the tools to reduce the number of workers is to change the organizational structure. This structure is far from perfect in Russian companies. It differs in "flat" at the top and "narrow" at the bottom.

The consequence of the large number of workers who report to the CEO is a "Flat" structure. Usually, the number of such people reaches 7-10 people, and sometimes 15.

When no more than three bosses report to the leaders, then the structure is called "narrow" at the bottom. This action leads to problems that arise between functional units, between project managers and managers.

For a company to perform better during a crisis, it needs a “flatter” bottom structure. This is achieved in three ways:

enlarge structural subdivisions (combining two departments);
reduction of intermediate levels of management (for example, the abolition of departments and the subordination of department heads directly to the head of the directorate);
establishing the optimal number of positions and the number of divisions (for example, up to seven to nine people in a department, at least four departments in a department, at least three departments in a department).

Consolidation of structural units and reduction of management levels will reduce the cost of middle managers - heads of departments and departments - with the smallest change in the scope of functions performed and without dismissal of ordinary employees. For example, a company that manages one large holding company managed to reduce personnel costs by $1.5 million per year by eliminating intermediate levels of management and consolidating divisions.

3 Ways to Reduce Manufacturing Costs by 20% in One Year

Practitioner tells

Andrey Evseev, General Director of CJSC Tula Transformer Plant

All of our production personnel work on a piecework basis, so a decrease in the volume of orders automatically led to a decrease in piecework wages (the piecework rates themselves remained the same).

To reduce the cost of wages for management personnel, a shortened (four-day) working week has been introduced (the same applies to piecework workers). All employees can use the additional day off at their own discretion, including for part-time work on the side. In my opinion, a shortened week is better than a part-time job, as people have a full day freed up.

We have no superfluous employees among the management and engineering staff, so there is no one to cut here. As for production pieceworkers, they could be reduced, and then, while maintaining the general wage fund, the average wage would increase. However, the workers themselves do not want this, for fear of becoming unemployed.

3. Reduction and redistribution of functions.

Functional optimization can be carried out in some directions.

Reducing the number of reports, sources of processed information and the level of detail. Managers are often overwhelmed with reports that are too bulky and poorly structured. If you reduce the level of detail of reports, this will lead to a reduction of 20-30% and can improve the speed of decision-making in management.

Transfer of functions of permanent structural units to project units (working groups) and collegial management bodies. In one company, it was decided to liquidate the staff unit dealing with the integration and restructuring of new assets, and transfer its responsibilities to a working group consisting of representatives of different functional blocks. This has given good results in terms of cost reduction.

Allocation of functions to common service centers and their transfer to outsourcing. An example is the transfer of IT support and administration functions to a third-party firm. This works because, in search of new clients, some of these firms have lowered their prices.

Lean: small steps for big goals

Practitioner tells

Mikhail Semenov, General Director of Qbik, Moscow

Our company manufactures and installs mobile structures at fairs and festivals. We call a unit of such a design (a place for one seller) a cube. When we first opened production, the installation of one cube was expensive, since the consumption of materials was not taken into account in any way. Gradually, we began to work on reducing costs. A special scientific center was organized, which included an architect, designer, head of the production unit and the General Director. Every two weeks, department heads poll employees for any suggestions or ideas for optimization, and then bring them up for discussion at a general meeting of directors in the center, which takes place once a month. Let me tell you about some of the implemented ideas.

Standardization of cube elements. The dimensions and shape of all elements of the cube were standardized and described in a special regulation. For example, the front and rear pillars of the cube were unified, which made the work of installers easier: today they do not need to think about which pillar and which side to fit. As a result, the time for assembling the cube has been reduced. In addition, its size has become more compact (now it is smaller by 15-20 cc) without losing functionality.

Minimize waste when sawing beams and slabs. The architect, together with the director of the production part, compared the standard market sizes of the raw materials with the details of the cube. As a result, each beam, each board and slab was lined up so that no more than 5% of the materials went to waste. For example, in the past, one OSB (oriented standard board) was only enough to create a floor. Now you can make both the floor and the table out of it. For the manufacture of pillars, a whole beam used to be completely gone, but now there is material for the leg of the table, which reduced costs by 4% on a production scale. The method of sawing all types of beams and plates is fixed in the regulations, which each employee of the production must adhere to. We do not throw away 5% of waste - they are used to decorate structures and repair cubes.

Design. Previously, we made identical cubes that lined up in a row. And now we collect only the first cube, and we attach the rest to it. Due to the fact that the cubes had common elements (for example, one common wall), wood consumption was reduced by 8%. In addition, a single design is stronger in itself.

Increased structural strength. The head of the production unit at the next meeting suggested equipping all the poles with wooden inserts. At one of the festivals, we were convinced of the effectiveness of this idea: during a hailstorm, a tree fell on the cubes, but this did not affect the design in any way.

Reusable cubes. Previously, when assembling cubes, self-tapping screws were used. When the cube was assembled for the second time, new holes had to be made for the screws, as water got into the old ones and corroded the structure from the inside. Now we fasten everything with bolts. Holes for them are made during the production process and then used repeatedly. The installation time of the cube has been reduced by 20 minutes, and there are no more extra holes. In the future, we plan to improve the mount.

Production of related products. When we built up the festival site in Monaco, the organizers asked us to install not only blocks, but also swings for children and other elements. Then we had the idea to expand production. Now we also make swings, tables and much more. Expansion of capacities and readjustment of equipment was not required. Only the volumes of purchases of wood have increased.

From February to June 2015, the work of our center for optimization of production costs helped to reduce costs by almost 14%. Now, for each new product that is launched into production, we immediately draw up a standard (how to cut the source material, how to assemble, etc.) so as not to repeat the mistakes made at the dawn of our first cubes.

Common mistakes made in reducing production costs

Identifying the most important cost items that need to be reduced is one of the mistakes that are typical for enterprises. Management is always aware of the biggest costs of the firm. But as the firm grows, the business becomes more complex, and executives can't always change cost growth at some point. The firm, for example, pays attention to the most obvious, but fails to notice unjustified costs from the category of others.
Incorrectly determining what bears the most significant costs is a big mistake. When a firm aims for a minimum cost of production, it may increase its output but fail to sell it. As a result, the desire to reduce production costs per unit of output will lead to their increase due to the large volume of production. If you replace this action by reducing the cost of production, efficiency will increase.
Losing the individuality and competitiveness of the company's products, if they are of high quality, is a detrimental consequence of cost reduction. Despite the fact that by reducing expenses, you can get an increase in income. But in the long run, this action will cause unjustified harm to the company. In particular, a fashion accessory store may be able to generate some revenue from savings in stocking and staff training. But still, such an economical action will undermine the credibility of the store and lead to a decrease in customers.
Spoiled relations with suppliers, workers of the company, due to uncomfortable conditions for their work.
Loss of important employees while reducing costs in critical areas.
Misunderstanding of the company's cost interdependence mechanism. After all, sometimes a general cost reduction can be achieved by increasing them for some particular type of activity. Example: An increase in travel expenses can lead to contracts with new suppliers who sell raw materials cheaper than old suppliers.

The first priority for the owners of any enterprise is to increase the efficiency of the business and develop it, while developing a plan,.

Currently, there is no comprehensive solution to reduce costs, most tools allow you to manage only one of the business components.

Some businessmen believe that to solve the problem of how to cut costs in a business, it is possible by spending funds from the cash desk or the company's current account. This is a common mistake. Payments to the cashier are made after a preliminary agreement and obligations taken earlier. If the manager manages only payments, he will soon realize that there is absolutely not enough finance. To prevent this from happening, in no case should you increase the credit resource, but you need all possible income and expenses of the enterprise. So, you need to draw up a financial plan - short-term (for a month) and long-term (for a year) and periodically update it.

When planning the expenditure of finance, financial discipline must be strictly observed. Leadership decisions are violated only in extreme cases. The leader is always in charge in the process of how to cut costs.

The manager must have accurate information about the enterprise in his hands. On its basis, he makes decisions about the management impact. If an enterprise measures the elements of the cost of repairing a marriage, then as part of the cost reduction program at the enterprise, it becomes possible to set a goal for the company's departments. Goal control is essential.

In order to carry out systematic work on the issue of how to reduce costs, the enterprise will have to implement a financial planning and control system. Such a system has a positive effect already in that the company no longer receives extra credit resources, which means that there is a significant savings on interest on payments.

Cost reduction in the enterprise can be carried out as follows:

Conduct a detailed inventory of the company's expenses (a task for the financial and economic department);

Determine the category for each item of expenditure (high priority, priority, eligible costs, unnecessary costs), after which the analysis of the amount of costs for each category and the analysis of the consequences of abandoning unnecessary costs is carried out;

Completely stop financing unnecessary expenses if the goal is to minimize business costs. In a critical situation, spending on an acceptable category is sharply limited.

Having done all this, you can move on to the next step. To do this, a working group is formed from the heads of the company's departments. At the meeting, factors that influence the appearance of certain costs are worked out and ways are prescribed to reduce business costs for each item. Usually there are 4 areas of work:

1. Analysis of the feasibility of production technology and the choice of more economical

Constant cost analysis is needed:

Does the technology meet the optimal standards;
- appropriate loading of production capacity, rhythm, no interruptions in production;
- elimination of failures in the shipment system, because storage is much more unprofitable, and full warehouses lead to a stop in production;
- whether the personnel of the enterprise observes production technologies;
- What are the fluctuations in production volumes, are they accompanied by an adequate change in the number of staff and wages.

To fully control costs, we need a full management cycle: create a regulatory framework, make forecasts, correlate the norms with the plan and monitor costs.

2. Purchasing management

Centralize purchases;
- reduce purchase prices;
- to form a database of suppliers;
- introduce for buyers personal responsibility for the cost of procurement costs;
- detail the procurement budget by agents, quantity, nomenclature;
- carefully prepare tenders - correctly draw up documents, determine the transparency of the choice.

3. Optimize headcount and payroll

Reducing staff is a painful but very effective way to reduce costs in an enterprise. When a company grows, it invariably attracts a large number of specialists. If it grows too big, a significant part of its income will go to the payroll.

Remember that a large number of people increases the loss of the enterprise in wages and social contributions, and also increases the cost of maintaining jobs. It is necessary to analyze which departments are really needed and which are not, which will reduce costs in the enterprise. That is, in order to optimally reduce costs, the company needs to remove excess staff. But it is worth cutting only really unnecessary staff, and not giving the task to the heads of departments to reduce the number of people by a certain percentage.

4. Optimize business processes at the enterprise, reduce non-production losses and increase labor productivity in departments

The enterprise must use the concept of "Lean Production": any actions are considered from the point of view of the Client - whether they create value for him or not. So you can distribute all the activities of the enterprise:

Activities that will add value to the final product;
- actions that do not create value, but are inevitable;
- actions that have no value.

If you analyze the activities of the enterprise from the point of view of the Client and at the same time solve the problem of reducing costs, then the results will be excellent. Due to the transition to Lean production, the enterprise, at the expense of its resources, significantly increases the turnover of funds, frees up personnel for solving other tasks, shortens the production cycle, minimizes losses and improves product quality.

The implementation of these measures is entrusted to the relevant units, and these units must provide a plan, how to cut costs in a business, with expected results and responsible persons.

State educational institution

Higher professional education

"State University of Management"

Department of Political Economy

The main ways to reduce costs in the enterprise

Student's creative work

IISU information management 1

Alexandrova Alexandra

Checked

Dan. Rybina Marina Nikolaevna

Moscow

1. The main ways to reduce costs in the enterprise

Introduction

1.1 Enterprise costs.

1.1.2 Cost estimation approaches

1.2 Ways to reduce costs

1.2.1 Cost reduction program

1.2.2 Introduction of information technologies and their impact on costs.

Conclusion

2. List of used literature

3. Questions for self-control

5. Glossary

6. Answers to the test

1. O main ways to reduce costs in the enterprise .

Introduction

The objectives of this creative work is to study production costs 1 and ways to reduce them. Production costs are now a rather serious and urgent problem today, because in the conditions of market relations the center of economic activity is moving to the main element of the entire economy - the enterprise 2. It is at this level that the products needed by society are created, the necessary services are provided. The most qualified personnel are concentrated at the enterprise. Here the issues of economical expenditure of resources 3 , the use of high-performance equipment and technology are solved. The enterprise seeks to reduce to a minimum the costs (costs) of production and sales of products.

Costs reflect how much and what resources were used by the firm. For example, the cost elements for the production of products (works, services) are raw materials and materials, wages, etc. The total amount of costs associated with the production and sale of products (works, services) is called the cost.

The cost price 4 of products (works, services) is one of the important generalizing indicators of the firm's (enterprise's) performance, reflecting the efficiency of resource use; the results of the introduction of new equipment and progressive technology; improvement of the organization of labor, production and management.

The first chapter examines the very nature of costs and their definition, this issue is especially important in the transitional stage of the Russian economy, since it has a decisive effect on Russian entrepreneurship. Every entrepreneur should be able to calculate his production costs well. If he does not know how to calculate his costs, then there is a very high probability that they will turn out to be more than income, i.e. the firm will suffer losses. And if the company gets into a state of financial crisis, then it can be very difficult to get out of it. Before starting any new business, it is necessary to make as accurate calculations as possible, to predict and plan your future activities, to study both external factors that can affect the position of the company, such as demand, and internal ones, such as production costs.

And for an economist, knowledge of production costs is also important from the point of view that, as we will see below, they are one of the most important factors affecting the supply of products on the market.

There are various concepts of production costs, which from different points of view characterize the costs of the company for the manufacture of products.

Any firm seeks to obtain maximum profit at minimum total cost. Naturally, the minimum amount of total costs varies depending on the volume of production. However, the components of total costs respond differently to changes in output. This applies primarily to the cost of paying maintenance personnel and paying production workers.

Also, the purpose of the work is to study the impact of production costs on profit. This question is also a concept of economic rationalism.

The essence of the concept of economic rationalism lies in the assumption that economic entities, on the one hand, determine the benefits from their actions, and, on the other hand, the costs necessary to achieve these benefits, means and compare them in order to maximize the benefits at the given costs of the resources used (or minimize the costs necessary to obtain these benefits). Such a comparison of benefits and costs in making economic decisions makes it possible to determine the most optimal actions of a given economic entity under given conditions. In this case, the benefits are the benefits received by the given economic entity, and the costs are the benefits that the given economic entity loses during this action. The rationality of the behavior of economic entities will then consist in maximizing income from economic activity.

1.1 Enterprise costs.

Each enterprise, firm, before starting production, determines what profit, what income it can receive. The profit of an enterprise, a firm depends on two indicators:

· Prices of 5 products

production costs

The price of products on the market is a consequence demand interactions 6 and suggestions 7. Under the influence of the laws of market pricing in conditions of free competition, the price of products cannot be higher or lower at the request of the manufacturer or buyer, it is leveled automatically. Another thing is the costs of production factors used for production and sales activities, called "production costs". They can increase or decrease depending on the amount of labor or material resources consumed, the level of technology, the organization of production and other factors. Consequently, the manufacturer has many cost-cutting levers that he can bring into play with good guidance. What is meant by production costs, profit and gross income?

In general, the costs of production and sales (the cost of products, works, services) are the valuation of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources, as well as other costs used in the production process of products (works, services). for its production and distribution.

The costs of production and sale of products include costs associated with:

direct production of products, due to technology and organization of production;

use of natural raw materials;

preparation and development of production;

Improving the technology and organization of production, as well as improving the quality of products, increasing their reliability, durability and other operational properties (non-capital costs);

· invention and rationalization, conducting experimental work, manufacturing and testing models and samples, paying royalties, etc.;

maintenance of the production process: providing production with raw materials, materials, fuel, energy, tools and other means and objects of labor, maintaining fixed production assets in working order, fulfilling sanitary and hygienic requirements;

Ensuring normal working conditions and safety measures;

production management: maintenance of employees of the management apparatus of an enterprise, a company and their structural divisions, business trips, maintenance and maintenance of technical controls, payment for consulting, information and audit services, hospitality expenses associated with the commercial activities of enterprises, firms, etc.;

training and retraining of personnel;

· deductions for state and non-state social insurance and pension provision, to the State Employment Fund;

Deductions for compulsory health insurance, etc.

The specific composition of costs that can be attributed to production costs are regulated by law in almost all countries. This is due to the peculiarities of the tax system and the need to distinguish between the company's costs according to the sources of their reimbursement (included in the cost of production and, therefore, reimbursed at the expense of prices for it and reimbursed from the profit remaining at the disposal of the company after paying taxes and other obligatory payments).

In Russia, there is a decree on the composition of costs for the production and sale of products (works, services) included in their cost, and on the procedure for the formation of financial results taken into account when taxing profits.

1.1.2 Cost estimation approaches

There are two approaches to cost estimation:

accounting

economic

Both accountants and economists agree that a firm's cost in any period is equal to the cost of the resources used to produce goods and services sold during that period. In the financial statements of the company, actual ("explicit") costs are recorded, which are cash costs for paying for the used production resources (raw materials, materials, depreciation, labor, etc.). However, economists, in addition to explicit, take into account "implicit" costs. Let's explain this with the following example.

Let us assume that the firm invests in the production of products borrowed capital, which it took out from the bank; then the costs would include funds for the repayment of bank interest. Therefore, provided that borrowed capital is invested 8, implicit costs in the amount of bank interest must be excluded from the firm's income.

However, even the concept of "implicit costs" does not give a complete picture of the true costs of production. This is explained by the fact that out of the many possible options for using resources, we make one specific choice, the uniqueness of which is forced by limited resources.

So, for example, being carried away by TV, we miss the opportunity to read a book, having entered the institute, we lose the opportunity to receive wages if we were engaged in this or that job.

Therefore, when making this or that production decision and evaluating the actual costs, economists consider them as costs of missed (lost) opportunities.

Opportunity costs are understood as the costs and loss of income that arise when choosing one of the options for production or sales activities, which means the rejection of other possible options.

Let's look at an example. JSC "Stroitel" invested 300 million rubles. in the production of cranes; according to the financial report, net profit amounted to 35 million rubles. But if these 300 million rubles. were invested in the production of paper, then the JSC could receive 67 million rubles. net profit.

What is the profit of JSC "Stroitel" from the point of view of an accountant? 35 million rubles But from the point of view of an economist, a loss of 32 million rubles is obvious. (67-35). Thus, the cost of lost opportunities can be considered as the amount of income that the factors of production could provide to the firm if they were more beneficially used in alternative options.

Let's sum up all the above.

The cost of a firm in any period is equal to the cost of the resources used to produce goods and services sold during that period. The profit 9 of the enterprise depends on the price of the product and the cost of its production. The price of products in the market is a consequence of the interaction of supply and demand. Here, the price changes under the influence of the laws of market pricing, and costs may increase or decrease depending on the amount of labor or material resources consumed.

It should also be noted that the specific composition of costs that can be attributed to production costs are regulated by law in almost all countries.

1.2 Ways to reduce costs

As already noted, in conditions of free competition, the price of products produced by enterprises and firms is automatically equalized. It is subject to the laws of market pricing. At the same time, every entrepreneur strives to obtain the highest possible profit. And here, in addition to the factors of increasing the volume of production, promoting it to unfilled markets, etc., the problem of reducing the costs of production and sale of these products, and reducing production costs is inexorably put forward.

In the traditional view, the most important ways to reduce costs is to save all types of resources consumed in production - labor and material.

Thus, a significant share in the structure of production costs is occupied by wages (in the Russian industry - 13-14%, in developed countries - 20-25%). Therefore, the task of reducing the labor intensity of products, increasing labor productivity, and reducing the number of administrative and maintenance personnel is relevant.

Reducing the labor intensity of products, increasing labor productivity can be achieved in various ways. The most important of them are the mechanization and automation of production, the development and application of progressive, high-performance technologies, the replacement and modernization of outdated equipment. However, some measures to improve the applied equipment and technology will not give the proper return without improving the organization of production and labor. Often enterprises, firms acquire or rent expensive equipment without being prepared for its use. As a result, the utilization rate of such equipment is very low. The funds spent on the acquisition do not bring the expected result.

Proper organization of labor is important for increasing labor productivity: preparation of the workplace, its full loading, the use of advanced labor methods and techniques, etc.

Material resources occupy up to 3/5 in the structure of production costs. This explains the importance of saving these resources, their rational use. The use of resource-saving technological processes comes to the fore here. It is also important to increase the exactingness and widespread use of incoming quality control of raw materials, components and semi-finished products received from suppliers.

Reducing the cost of depreciation of fixed production assets can be achieved through the best use of these funds, their maximum utilization.

At foreign enterprises, such factors as reducing production costs are also considered, such as determining and maintaining the optimal size of a batch of purchased materials, the optimal size of a series of products launched into production, deciding whether to produce or purchase individual components or components from other manufacturers.

It is known that the larger the batch of purchased raw materials, the greater the average annual stock and the greater the amount of costs associated with the storage of these raw materials, materials (rent for storage facilities, losses during long-term storage, losses associated with inflation, etc.). However, the acquisition of raw materials and materials in large quantities has its advantages. The costs associated with placing an order for purchased goods, with the acceptance of these goods, control over the passage of invoices, etc. are reduced.

1.2.1 Cost reduction program

We can conditionally distinguish three stages of cost reduction (reduction):

· Express reduction (can be done within a few days).

Rapid reduction (will take several weeks or months).

· Planned reduction (assumes work for at least several years).

The duration of the stages of the cost reduction program is commensurate with their effect: for the first it will be the fastest and very modest, and for the third it will be very slow, but the most significant.

Stage I. Express reduction

At this stage, a decision is made to immediately stop financing those items of expenditure that management considers unacceptable given the current financial situation of the enterprise. The following sequence of actions is possible:

Carrying out the most detailed cost inventory enterprises (performed by employees of the financial and economic unit).

Determining the category of each item of expenditure and impact analysis rejection of unnecessary spending. It is recommended to develop solutions at a collective meeting with the participation of the heads of all key departments. (The four main categories of expenditure are presented in the table).

· Complete cessation of financing of the fourth category of expenses, if the goal is to reduce costs. In a critical financial situation, it is necessary to stop or sharply limit spending on the third category. In certain cases, it is possible to limit the costs of the first and second categories, although it is useful to remember the proverb here: "The miser pays twice."

Classification of expenses by priority:

Type	Description	Examples
High priority	Articles, if the financing of which is terminated, there is a threat of stopping operations	Payment for raw materials and materials for production Remuneration of key workers
Priority	Items that are detrimental to the normal conduct of business if their funding is terminated	Payment of mobile communication to key workers
Permissible	Articles that it is desirable to keep if the enterprise has free funds	· Payment for sanatorium treatment of employees Payment for educational seminars for employees
Unnecessary	Items that will not have a material impact on the conduct of business if funding is discontinued	Reimbursement for executives

Stage II. Rapid reduction

At this stage, the enterprise takes steps of an organizational and technical nature, allowing to reduce the fixed and variable costs of the company to an acceptable level. We can recommend the following work algorithm :

· At the meeting, the main factors influencing the appearance of a particular cost item are determined. Methods are selected to achieve cost reduction for each item. For example, the cost of raw materials and materials may be affected by the following: purchase prices; the need for the volume of purchases, determined by technology; overspending associated with inaccurate adherence to technology and a high level of marriage; theft. Thus, four areas of work are outlined:

Decrease in purchase prices;

Analysis of the validity of the applied production technology and the choice of the most economical;

Identification of the reasons for overspending and improvement of the most "faulty" technologies;

Fight against theft in the workplace.

· The implementation of the developed measures is entrusted to the relevant departments (for example, the task of reducing purchase prices is transferred to the purchasing department, and the task of combating theft is transferred to the security service). Units should submit plans with clearly defined timelines, intended (measurable) results, and who is responsible for each step. If the department convinces the director that the proposed method cannot reduce costs, employees are required to develop alternative solutions to reduce costs.

· The cost reduction program is implemented under the personal control of the General Director. The financial division regularly (at least once a month) evaluates the achieved economic effect and informs the management about it.

Some ideas of "quick" solutions to achieve economic effect at this stage are given below.

Reducing the cost of raw materials and materials. The cost of raw materials and materials is one of the most significant cost elements in industrial enterprises. There are a number of methods for systematically reducing this category of expenses as part of organizational and technological improvements. One of the "quick" solutions to reduce the cost of raw materials is to renegotiate contracts with suppliers.

As a rule, large market players have greater financial leverage, so they can supply raw materials at lower prices and provide payment deferrals. If your company is large, you can organize tenders for the supply of the main items of the nomenclature of raw materials. It is important to remember: as a rule, there are firms on the market that are ready to supply a similar product at lower prices.

Reduction of overhead costs. The overhead costs of most enterprises include the cost of telecommunications, electricity, transport. Below are some possible measures to “quickly” reduce these categories of spending, based on the experience of real enterprises. Of course, the list of costs and possible measures to reduce them is not exhaustive, but it can give some practical ideas.

Electricity:

Introduce energy saving programs (for example, make sure employees turn off lights and all unnecessary equipment);

Limit the lighting of the premises and territory at night (to the technologically necessary);

Switch to economical lighting (IKEA bulbs) and equipment (for example, the introduction of a modern boiler system or autonomous compressors can pay for itself within a year).

· Transport:

Limit the number of company cars;

Consider the issue of outsourcing the functions of the trucking department to a trucking company;

Involve a logistics company (or a professional logistician) for advice on minimizing transportation costs.

· Telecommunications:

Reduce the list of employees who pay for mobile communications, set a spending limit for each;

Limit the number of phones that allow long-distance calls, oblige employees to use IP-telephony services (much cheaper);

Limit the number of computers with Internet access (if the company is not related to the information or consulting business); in addition, you can install a program on the company's server that filters traffic by keywords, as well as block popular entertainment sites;

Negotiate with one of the large (this is important, since small companies tend to set higher rates for their customers) telecommunications companies on package services (telephone communications plus the Internet), if possible, arrange a tender.

Information technology costs:

Decide on the standardization of computer hardware and software in the company; it is desirable to conclude an agreement with a major supplier for package services;

Conduct an inventory of databases and other sources of business information, streamline the acquisition of this information;

Centralize subscriptions to newspapers and magazines.

Reducing the payroll. Downsizing is often a painful but necessary step. During the period of growth and conquest of new markets, the company inevitably attracts many specialists. At a certain point, it may grow unnecessarily and the payroll fund (PAY) will eat up a significant part of its income. For example, after the crisis of 1998, enterprises focused on the domestic consumer began to increase output and employment. Often, output increased by one and a half times, revenue - by two (due to rising prices and changes in the range), and staff - by three. This meant a decrease in the efficiency of workers in monetary terms by one and a half times, and in quantitative terms (production output per person) - twice.

It must be remembered that “excess people” are not only the loss of the enterprise in the amount of wages and social contributions, but also the costs of maintaining the workplace and, most importantly, the labor costs of the “necessary people”. For example, the only office secretary, preparing coffee for a lazy manager, may miss important calls. An unnecessary controller who invents new forms of sales department reports to justify his usefulness forces department employees to spend several hours a week filling out empty papers instead of working with clients.

Stage III. systematic reduction.

At this stage, the enterprise initiates a number of organizational change projects, each of which can have a significant impact on the level of costs. Since we are talking about high-priority projects, it is recommended to appoint managers for each who are personally responsible for the implementation of all stages of the project and devote a significant part of their working time to this. The manager must have sufficient authority, since the solutions he proposes will be reflected in new work regulations, organizational charts, changes in production technologies, subordination, payment methods, etc.

Systematic cost reduction is associated with improved management in three areas:

· investment 10 ;

purchases;

production processes (improvements due to organizational and technological changes).

These three processes - investment, purchasing and production - form the lion's share of the company's costs. Let us consider successively the measures that can be taken to improve them.

Investment management. Any enterprise is an environment in which there is continuous competition for investment resources. If current expenses are often mandatory (raw materials, electricity and wages provide ongoing production activities and sales), then investment projects create new business opportunities. Depending on whether a company purchases the best machine or software, it can gain or lose competitive advantage.

Many enterprises apply the principle of two-stage selection of investment projects. At the first stage, the unit initiating the project prepares a preliminary application with a rationale for its feasibility. After screening out less competitive ideas, at the second stage, the calculation of the feasibility study of the project is carried out (with the involvement of independent experts - internal or external consultants with expertise and similar calculations). After that, projects with the best economic indicators (payback period, internal rate of return, etc.) are selected.

Procurement management. Purchasing is the main cost area of the enterprise. Purchasing needs mainly arise in the production and support departments of the enterprise. It depends on the buyer how effectively these needs will be satisfied in terms of range and cost. Therefore, regular improvement of the procurement process and the search for more profitable suppliers is the key to maintaining sustainable competitive advantages of the company.

Production business process management systems. The main model for the work of Russian enterprises (especially industrial ones) was laid down during the industrialization period of the 1930s, when the famous Ford plant in River Rouge was a role model. The three pillars of this model are:

Functional specialization of employees;

maximum standardization of components;

the leading role of technology.

Therefore, if you ask a technical specialist of almost any Russian enterprise how to reduce production costs, he will answer: need to install new, more productive equipment .

1.2.2 Introduction of information technologies and their impact on costs.

Performance is determined by many factors. The two most important of these are revenue growth and cost reduction. An enterprise can improve both indicators using modern methods of automating business processes in the field of sales and purchases. To understand how these solutions work, you need to get a better understanding of corporate business processes.

Buisness process.

A business process is a set of specialized, measurable tasks performed by people or systems in order to achieve a predetermined result. Processes have the following important characteristics:

· Processes have internal and external users.

· They occur within or between organizational units or between different organizations.

· They are based on the nature of the work performed in the organization.

The following are examples of business processes:

・Loan authorization

· Product development

· Travel planning

· Opening a new account

· Responding to a request for a quote

· Transportation of goods

Since the advent of computer technology, organizations have sought to use it to improve their business processes. Initially, the focus was on enterprise resource planning. The main areas where automation was introduced were manufacturing, accounting, purchasing and logistics. The next step was sales and marketing automation. After that, it was the turn of customer and supplier relationship management. In recent years, there has been an introduction of business process management (Business Process Management, BPM). Businesses are using BPM in areas where it can make a big difference. Some of these processes involve multiple business units, while others are the result of real-time interactions with suppliers, customers, and other business partners.

Business Process Management (BPM)

BPM automates and streamlines business processes that are vital to a company in order to increase productivity. From hiring employees to processing a purchase order, BPM helps you reshape, control and manage workflows, using people and solutions to complete the process more efficiently.

E-procurement and e-sales

For any business, two processes are vital - buying and selling. Although these processes are an integral part of supply chain management, it is only through their optimization and automation that an enterprise can achieve significant productivity gains, even when the entire chain is not yet completely streamlined. This can be achieved through e-procurement and e-commerce solutions. The benefits of these solutions:

Direct:

· Cost reduction

Income growth

· Productivity increase

Reduced overhead costs

Streamlining supply chain processes

Indirect:

Ability to redistribute released resources for key business processes

・Improve the level of service

Access to a large number of suppliers in a relatively short period of time

Improving the quality of customer relationship management

· Staying competitive

For small businesses that do not yet have the necessary resources to develop or purchase the above solutions, but have a desire to see how business process automation works in reality, there are B2B (Business to Business) marketplaces that have standard solutions included in their systems.

In fact, the use of these simple but effective solutions can radically change the way an enterprise is run. However, the degree of success will depend on the following factors:

· Implementation should concern management and individual units.

· It is necessary to have a strong leader and support from both management and subordinates.

· Both buyers and suppliers must be included in the implementation process.

· Workers should be trained as the application is implemented.

Conclusion

In accordance with the goals set at the beginning of the work, I will summarize the results of the research.

The cost of a firm in any period is equal to the cost of the resources used to produce goods and services sold during that period. The profit of the enterprise depends on the price of products and the costs of its production. The price of products in the market is a consequence of the interaction of supply and demand. Here, the price changes under the influence of the laws of market pricing, and costs may increase or decrease depending on the amount of labor or material resources consumed.

The specific composition of costs that can be attributed to production costs are regulated by law in almost all countries.

The main types of costs. So, the division of production costs of the enterprise into fixed, variable, gross and marginal ones is accepted. Fixed and variable costs together make up the gross cost of production.

In enterprises, the cost structure is often understood as the ratio between fixed and variable costs, which allows you to analyze the structure and draw conclusions about the quality of production.

The most important ways to reduce the cost of production is to determine the optimal amount of purchased resources and launched products consumed in production - labor and material. As well as reducing the labor intensity of products and increasing productivity.

The basic position of modern economics is about production costs: in order to get more of any good, it is necessary to provide potential producers and suppliers of this good with a certain incentive that would encourage them to transfer resources from their current use to the production of what we want. It is necessary that the benefits of such a transfer exceed the costs of it, i.e. exceeded the value of those opportunities that potential entrepreneurs will have to give up.

Costs are always the result of supply and demand. An increase in the demand for any good will increase the cost of acquiring that good only in so far as it does not cause an increase in the quantity supplied.

Bibliography:

1. Borodina E.I. - Finance of enterprises - Moscow: 1995.

2. Bru S., McConnell - Economics vol. 2 ed. 2006.

3. Gorfinkel V.Ya., prof. Kupryakova E.M. - Economics of the enterprise - Moscow: 1996.

4. Gruzinov V.P. - Enterprise Economics and Entrepreneurship - Moscow: 1994.

5. Mutnyan A.V., Okonnikov I.M., Panteleev E.A. - Microeconomics - Izhevsk: 2003

6. Peters M., Hisrich R. - Entrepreneurship - Moscow: 1989.

7. Savitskaya G.V. - Anal from economic activity - Minsk - Moscow: 1999.

8. Sidorovich A.V. - Course of economic theory - Moscow: 2007.

9. http://www.gd.ru/ General Director September 2008

10. http://ezine.rusbiz.ru/ "Electronic magazine for business people"

Questions for self-control:

1. What are costs?

2. The consequence of what is the price of products?

3. Types of cost estimates?

4. Is the specific composition of costs regulated by law?

5. Do material resources affect costs?

6. What are the 3 stages of the cost reduction program?

8. How does information technology affect costs?

Test

1. What determines the profit of the enterprise?

A. From the price of products

B. on the type of resource

A. product demand

B. product offerings

In the interaction of supply and demand

A. theoretical

B. economic

V.accounting

A. Profit minimization

B. Increase in the loan amount

B. Profit maximization

A. Express reduction

B. Planned reduction

B. Hyper contraction

D. Rapid contraction

A. investment

B. demographic situation

B. purchases;

D. production processes

Glossary

1. Costs of production - expressed in monetary terms, the total cost of living labor and material resources for the manufacture of products or services.

2. Enterprise - A separate specialized unit, the basis of which is a professionally organized labor collective, capable of using the means of production at its disposal to produce the goods necessary for the consumer (perform work, provide services) of the appropriate value.

3. Resource - means that allow, with the help of certain transformations, to obtain the desired result (natural resources, labor, etc.)

4. Cost - all costs (costs) incurred by the enterprise for the production and sale (sale) of products or services.

5. Price is the monetary characteristic of a good.

6. Demand is the quantity of a good that buyers are willing to buy at a given price.

7. Offer - the amount of goods that is available for sale at a certain price.

8. Capital - a set of goods, property, assets used for profit, wealth.

9. Profit - the excess in monetary terms of income from the sale of goods and services over the costs of production and marketing of these goods and services.

10. Investments - long-term investments of capital for the purpose of generating income.

Test Answers

2. What does the profit of a business not depend on?

A. From the price of products

B. on the type of resource

B. from the cost of production

2. What determines the price of a product?

A. product demand

B. product offerings

B. the interaction of supply and demand

3. What are the approaches to cost estimation?

A. theoretical

B. economic

V.accounting

4. What is the manufacturer looking for?

A. Profit minimization

B. Increase in the loan amount

B. Profit maximization

5. Which step is not included in the cost reduction program?

A. Express reduction

B. Planned reduction

B. Hyper contraction

D. Rapid contraction

6. What is systematic cost reduction not associated with?

A. investment

B. demographic situation

B. purchases;

D. production processes

The costs of distribution, production are a qualitative indicator of the activity of the enterprise. The level of costs is directly related to the final result: the higher the costs, the more invested in the creation of a product - goods or services, the greater the nominal value it has on the market. However, the optimal ratio of costs and profits is a matter of skillful management. It is necessary to reduce costs wisely, since each ruble invested should bring tens and hundreds of rubles of profit. Each company solves the issue of their reduction in different ways. Some managers make fundamental decisions about getting rid of non-core assets, dividing the business, while others reduce spending on budget items.

First, it is necessary to analyze the cost structure and select those cost items that contribute the most to the costs. Secondly, it is necessary to determine which cost items can in principle be reduced, and to what extent we can manage these costs. Suppose the cost item "raw materials and materials" is 50% in the total cost structure, but if it is impossible to find suppliers with lower prices, then it is extremely difficult to significantly reduce this item for a given output volume and without changing production technology. It should be noted that personnel costs that can be reduced, in addition to payroll, also include:

- expenses for the social package and benefits for employees;
- expenses for industrial training and retraining of employees;
- expenses for the selection of candidates and hiring;
- the cost of ensuring safety;
- the cost of maintaining jobs, including the cost of overalls, heating, cleaning, etc.;
- other types of personnel expenses.

The main principles that will help achieve cost reduction in enterprises are: planning, financial discipline and control.

The first principle of cost reduction in the enterprise is planning. Each enterprise must have a clear and specific financial plan, accounting for all possible income and expenses of the enterprise. At the same time, the manager must have a financial plan, both short-term, monthly, weekly, and long-term, investment, for a year, five years or more. Some solutions may be costly in the short term, but very beneficial in the future.

Another option for conducting the financial and economic activities of the enterprise is a preliminary detailed consideration of the proposed solutions, and not an analysis of the costs already incurred. The degree of effectiveness of each solution must be selected: from drawing up a feasibility study and determining project performance indicators to choosing the application of one or another financial and economic model of the enterprise. The main goal of such planning should be the exclusion of inefficient solutions that require serious financial costs.

Compliance with financial discipline is the second equally important principle of cost reduction. Those decisions that have been taken collectively in relation to financial expenditures may be violated only in case of emergency.

Accounting and control are important functions of any manager in all matters of the enterprise. The main rule in this matter is that the manager has objective data on the current financial condition of the organization.

Thus, if the enterprise observes all three principles of cost reduction, then such an enterprise becomes profitable in a short time. The manager has a clear mechanism for managing incoming finances, the company ceases to attract borrowed funds, significantly reducing the cost of interest payments. Cost management and cost reduction is a constant process that is necessary for the development of an enterprise and entry into new markets.

World experience shows that cost reduction is possible without radical methods of abandoning many costly items. On the basis of the AED program (analysis of economic activity), in world practice, the entire system of cost reduction is built, including a phased reduction in personnel. All employees of the company, from managers to ordinary performers, are usually involved in such programs. All labor processes of the enterprise are studied in detail and those that need to be automated or reduced by routine, repetitive operations are identified. According to the results of AED, the organization receives a stable result, achieving a certain goal: the structure of the company becomes more manageable, mobile. At the same time, costs are significantly reduced, budget is saved and profits are increased.

A similar effect is given by the process-by-process costing system (from the English. Activity Based Costing (ABC)). At the same time, the main processes are identified, as a result of which the product is created, and the costs necessary for organizing these processes. The main tool for reducing costs in the ABC system is the determination of redundant and unnecessary labor operations, the rejection of which will not affect the quality of the product. The rapid application of this method is possible by analyzing all costs and identifying three main components: costs that cannot be reduced without loss of quality; costs that can be removed, while negative consequences are inevitable; and costs that can be reduced without harming the enterprise. The latter costs are subject to immediate reduction.

The cost of raw materials and supplies are the most significant cost items in production, which can be reduced by constantly looking for new suppliers who can deliver in the shortest possible time with deferred payment. Such suppliers, as a rule, are large market players capable of supplying high-quality raw materials and materials. They appear on the market for a long time, so it is necessary to monitor the growth of small organizations and their mergers among themselves in order to quickly navigate the market.

Reducing overhead costs is possible with a detailed consideration of each cost item. For example, in order to reduce transportation costs, you can reduce your own fleet of vehicles to a minimum, attract, if necessary, the services of a third-party trucking company. Many world enterprises work on the terms of outsourcing, using the services of accountants, lawyers, business coaches under contracts for temporary paid work. This significantly reduces the cost of wages for maintaining a permanent staff. Reducing the cost of paying for mobile communications and the Internet is possible with an integrated approach: the list of positions that require such payment should be limited.

Distribution costs are an integral part of the financial and economic activities of any enterprise. The main goal of the manager is the rational reduction of production costs, that is, the elimination of any inefficient actions that can bring unnecessary costs and even losses, which are measured not only in monetary terms, but also in the loss of working time.