Control your strategy
Define your operational activities and function support in details to put in application your strategy and control it.
Operational activities are value added activities that help/maintain the company to generate revenu. R&D is often classified in support activities because consuming money than generating. But often it can be an important operational activities, when the prototypes like in oil gas are sold and installed for the client or the R&D is key activities to keep competitive advantages.
Support activities are the one helping the operational activities to achieve their goal.
The goal of the company is to maximise revenu and minimise cost. To maximise the revenu, differentiation strategy will help and to minimise expenses, a cost control is needed. Fix costs:
- Salaries
- Engineering costs
- R&D costs
- Marketing
Variable costs:
- Raw material -> High volume purchase
- Manufacturing costs -> Rationalize process, automatize
- Distribution costs -> By pass intermediate, centralize close to customer
Defining a cost control strategy doesn’t mean necessary to increase the volume to reduce the purchase price. Besides by conducting a volume market and controlling the cost, often the company is sacrifying its rentability even tough its driving to a dominant position.
For each product or service, it will be valuable to perform a cost breakdown analysis . An example is provided below, a light one to have the big pictures, but always perform the analysis in details in table format. Cost of the quality is often forgotten. It is to consider the related product defect non delivered or product return, that the company paid for and has to refurbish.
Often those information are accessible trough the MRP system but make it accessible to the design/product owner so that they can identify any potentials savings or improvements.
This table below is just for an example, for detailed calculation, it needs to consider the unit or the volume.
