The CGMA Cost Transformation Model Flashcards
Why was the CGMA Cost Transformation Model developed?
to provide a framework to help businesses
achieve and maintain their cost-competitiveness
Name the 6 suggested changes according to the CGMA Cost Transformation Model to achieve the objective:
1.) Creating a Cost conscious culture
2.) Understanding Cost drivers
3.) Managing the risks that come from a cost conscious culture
4.) Connecting products with profitability
5.) Maximising value from new products
6.) Considering the environmental impact of products
What is meant by Creating a Cost Conscious Culture?
the organisation should
aim to be a cost leader so that its costs are lower than competitors
and set a competitive benchmark. Everyone in the organisation
should be motivated and enabled to reduce costs in whatever way
possible. Technology can play a key role in reducing costs
What is meant by Understanding the Cost drivers?
his involves investigating costs to
determine why they change and how different variables impact on
the cost. Plans should be put in place to reduce the drivers of
costs (i.e. what it is that causes the cost to increase or decrease),
and possibly even the costs themselves if they are not necessary
or sustainably profitable in meeting customer’s needs. This may
involve critical evaluations of current systems and processes to
ensure that they provide the necessary information to support
effective decision making.
What is meant by managing the risks that come from a cost conscious culture?
careful consideration needs to be given to what might get in the
way of the business achieving its cost transformation and
management objectives. For example, whilst new technologies
may enable a business to reduce cost, this may also result in
reducing quality and customer satisfaction. These technologies
may also lead to increased competition. The organisation should
therefore have a clear risk management process in place to
identify, assess and manage such risks.
What is meant by connecting products with profitability?
it will be important that
every product or service makes a positive contribution to overall
organisational profits. This will involve understanding what drives
costs for each individual product and allocating shared costs to
products as accurately as possible.
What is meant by Maximising value from new products?
the potential profitability
of new products should be assessed before production begins.
Also, as part of product design, the product or service should be
made to be as flexible as possible so that it appeals to or can be
adapted to satisfy as many customer segments as possible.
What is meant by Considering Environmental Impact of the products?
negative
impacts (such as creating unnecessary waste) can add costs as
well as damaging reputation and sales
