Cost Reduction and Management of an Organization Essay

Cost Reduction and Management of an Organization - Essay ExampleToday, follow lessening as well as management happens to be the most essential thing for any organization. An organise endeavor which is intended to analyze the systems, practices, procedures, harvestings and specifications for enjoyment of necessary functions at lowest possible salute of ownership is to be designed. This integrated effort is to be taken keeping the expected performance, quality, reliability as well as maintainability is mind.Cost reduction is not only essential, but as well as possible. Organizations increasingly are focusing on having models that can enable them to carry through this target. There are also software vendors who have understood the importance of this and have designed solutions catering to this need of companies looking at constitute reduction by several techniques like Activity based saluteing and application of value analysis and value engineering. A case in point is the prod uct of IBM, which is industry leading solution called Telecom Pass 4.0 for telecommunication industry featuring cost management and cost reduction techniquesValue analysis is a turncock for improvement of cost as well as processes making an use of information about the processes of business and based on examination of different attributes of the processes for identifying areas of improvement. This is an organized method which focuses on the function of each process, service or material that adds value to the organization and there by attempts to define the correct cost, quality and parameters of acceptance in the determination of value so as to be able to redesign or reengineer a particular function.It is a structured and critical analytical process which determines the value of each rupee spent by finding out which are the most essential functions at the most economic cost thereby bringing out the value for money. Value analysis (alternately called as value engineering) happens to be a cost validation exercise that identifies required processes without touch on the quality of output resulting in lower costs.The application of value engineering comprises of the following activitiesIdentifying the existing activities and processesFinding out activities that can be eliminatedAnalyzing the cost.Performing a cost benefits analysis.Making a forecast of expenditure flows.Evaluation of alternative designs.Redesigning the processMaintaining qualityUndertaking feasibility Studies.Giving an advise on cost planningGiving an advice on cost limits and preparing budgets.Advising on cash flow forecasting.Activity Based Costing (ABC)It is a methodology applied for calculation of cost of the business by having a focus on the actual cost of the activities carried out for having an estimate of the actual cost of service or the product.It takes into consideration the diversity of cash based accounting system into accrual systems, defining the cost centers as well as cost alloc ation. Cost centers include products and services. Apart from this it also includes particular and detailed tasks in under each broad activity. Defining of cost centers varies with different kinds of businesses, but what is essential is that each and every activity and resources is identified. by and by identification of cost centers, the study of activities of each cost centre as