On The Problems And Countermeasures Of Executive Cost

Executive cost driver refers to the cost driver that determines the operation procedure of an enterprise. It was established after the decision of the structural cost driver. Moreover, these cost drivers are mostly non quantitative cost drivers, and the impact of other costs varies from enterprise to enterprise. If these motivations are successful, they can reduce costs and vice versa. Executive cost drivers mainly include:

1, the mode of production capacity utilization: the mode of production capacity mainly affects the cost level of enterprises through fixed costs. Because fixed costs do not change with the increase of production within the relevant range, when the utilization ratio of production capacity increases and the output rises, the fixed cost of unit products is relatively small, resulting in the reduction of unit cost. For enterprises with a large proportion of fixed costs, the mode of production capacity will have a significant impact on them, and the increase in output will bring about a marked decline in unit costs.

2, connection: the so-called connection refers to the interrelationship between various value activities. This connection can be divided into two categories: one is internal linkage; the other is vertical connection between the enterprise and the supplier (upstream) and the customer (downstream).

(1) intra enterprise linkage. The links between various value activities within the enterprise are all over the entire value chain. For example, links between basic production and maintenance activities, production operations and internal logistical links, advertising and direct door-to-door sales, quality control and after-sales service links. In view of interrelated activities, enterprises can adopt two strategies of coordination (coordination) and optimization (optimum) to improve efficiency or reduce costs.

(2) vertical connection: vertical links reflect enterprise activities and suppliers. Distribution channel Interdependence. The relationship with upstream suppliers is mainly the supplier's product design features, services, quality assurance procedures, product delivery procedures and order processing procedures.

3. Total quality management Different from traditional quality management, TQM emphasizes that the scope of quality management should be quality control in the whole process. The aim of TQM is to get the best product quality with the lowest quality cost. Therefore, the improvement of total quality management is always an important way to reduce costs. Cost driver It can bring great opportunities for enterprises to reduce costs.

The main difference between the above two strategic cost drivers is that for structural cost drivers, the higher the degree is, the better the problem is. But for executive cost drivers, it is generally believed that the higher the degree, the better. For example, we should try to strengthen and encourage employees to participate fully and improve the total quality management system. Moreover, the more the executive cost drivers summarize, the more helpful to the cost management of enterprises.