STRATEGIC COST MANAGEMENT

Agreeing on the need to manage Costs  

• Understand Goals 
• Obtain history of prices paid and volume purchased 
• Basic Supply Market Analysis 

Identifying Costs 

• Price Analysis (Competitive Advantage Measurement System - CAMS™)  
• Analyze Cost Breakdowns  
• Develop Process Map, Industry Cost Profile (ICP)  
• Build Basic Cost Model - Should Cost Model (Product/Service) or Price Discipline™ Model or Total Cost of Ownership (TCO) Model  

Measure for each critical Cost 

• Define Cost Drivers by formula-based Costing 
• Quantify Cost Drivers  

Define  

• Defining the Key Cost Drivers 
• Develop Strategic Options for the Key Cost Drivers 

Reduce 

• Adapt generic or create custom Strategy Statement  
• Detailed Supply Market Analysis 
• Detailed Should Cost Model (Product/Service) or Price Discipline™ Model or Total Cost of Ownership (TCO) Model  
• Identify net potential value 

Implement  

• Adapt generic action plan associated with Strategy Statement or create custom action plan 

Verify 

• Develop Negotiation Strategies  
• Brief the buyer and prepare the buyer for the negotiation strategy 
• Record progress of implementation of all action items 

Eternal 

• Capture lessons learnt and prepare for next negotiation  
• Record the status of value realised against overall Strategy Statement