What are the shortcomings of traditional cost management?

It is said that "R&D determines 80% of the product cost", which is the consensus of many excellent enterprises, but many companies have fallen into "misunderstandings" in the implementation processCommon misconceptions include forcing R&D to "cut material costs" and cutting internal R&D expenses. These two misunderstandings are typical "picking up sesame seeds and throwing watermelon" mistakes.

Myth 1: Cut material costsFor example, replacing existing materials with cheap materials can easily lead to subsequent quality problems and increase maintenance costs.

Zhongtian Huaxia Consulting has had in-depth exchanges with product managers and project managers of many domestic home appliance giants, and a question that must be asked about product cost management is: whether your internal material replacement activities have led to new quality problems are always "there"!

Myth 2: Reduce internal R&D expensesTake a real case: 10 engineers in the hardware development department of an electrical appliance giant applied for 10 soldering irons (for circuit soldering), and the person in charge of the department only approved the purchase of 2 soldering irons based on the determination that "it is impossible for 10 engineers to use soldering irons at the same time" based on the consideration of cost reduction.

The follow-up situation is: when an engineer needs to use an electric soldering iron, and finds that 2 electric soldering irons are in use, the engineer does not go to other work first as the supervisor "imagined", and then use the electric soldering iron after it is vacated, but stops the work at hand and concentrates on waiting for the "electric soldering iron", and the waiting time is often long, sometimes even half a day "full-time waiting period". And the salary of each engineer for half a working day is far more than the cost of a soldering iron.

The reason for the above two misunderstandings is that many corporate executives do not have the concept of "comprehensive cost of products".

Summary. Hello dear, glad for your question oh <>

Regarding the concept of traditional cost management: Traditional cost management refers to the coordination activities of the command and control organization in terms of costs. Typically includes:

cost policy; cost targets; cost planning; Cost control (cost reduction, maintaining cost levels, etc.). Traditional cost management is an important part of enterprise management: as an important part of enterprise management, the level of cost management not only reflects the overall management level of an enterprise, but also affects the core competitiveness of Chinese enterprises in the international market.

Traditional cost management concepts.

Hello dear, glad for your question oh <>

Guan Ze is simplified to the traditional concept of cost management: traditional cost management refers to the coordination activities of the command and control organization in terms of costs. Typically includes:

cost policy; cost targets; cost planning; Cost control (cost reduction, maintaining cost levels, etc.). Traditional cost management is an important part of enterprise management: as an important part of the management of the jujube industry, the level of cost management not only reflects the overall management level of an enterprise, but also affects the core competitiveness of Chinese enterprises in the international market.

Supplement: There are two views on the traditional cost management evaluation in the academic community. One of the views is to hold a completely negative attitude towards traditional cost management, believing that traditional cost management is a product of the planned economic system, which has not adapted to the requirements of the rubber hail economy of the socialist market, and a new cost management system must be established; The second point of view is to have a completely positive attitude towards traditional cost management, and believe that the cost management method in the 50s of the 20th century has proved to be effective in practice, because the cost of comparable products between 1952 and 1960 is decreasing year by year, so the cost management method of the 50s of the 20th century should be used as the basis of modern cost management.

The author believes that the view of holding a complete negative or completely positive view of traditional cost management is one-sided, and we should not only see that since the founding of the People's Republic of China, China's cost management has accumulated some good experience, but also should fully understand the defects of traditional cost management.

The traditional cost management system fails to adopt flexible and diverse cost methods, the higher the output, the simple assumption of accounting (i.e., the allocation of overhead costs based on direct labor hours or output), the lack of standardization of cost decisions, and the lack of modern management tools.

The higher the profit of the enterprise, the lower the cost, which can be increased or decreased; The cost plan lacks non-financial information such as science, sales market and sales channels, and the proportion of manufacturing expenses has risen significantly, and it seems that the larger the output.

The main body of cost management should be the blindness of the enterprise, customers, and post-cost management, ignoring the cost management of pre-production product design and the reasonable organization of production factors, which usually does not seriously distort the product cost and only pays attention to financial cost accounting.