1. TCM TOOLS & TECHNIQUES

2. TCM PRINCIPLES Resource Focus Strategic Context Future outlook
Integration with other Initiatives
Learning and Innovation
Enterprise wide Involvement
Aligned to Policy Development(PD)
Process Orientation
Performance Orientation

3. TCM PROCESSES Securing Governance Structure
IT Enabled architecture for capturing Cost Information
Calibrating TCM competency skills amongst employees

4. WAYS OF COST ANALYSIS Functional costs-material, labour etc.,
Departmental costs
Process methods
Direct and Indirect
Fixed and variable-marginal and semi variable
Activity based costs
Capital and Revenue
Total costs
Lifecycle
Cost of Ownership
Imputed and Indeterminate

5. TCM TOOLS Variance Analysis Target Costing Cost driver Analysis
Cost of Quality
Input Output Balance
Kaizen Costing
Total Cost of Ownership(TCO)
Activity cost management
Continuous Improvement
Performance Cost Management
Target Costing
Risk Articulated Cost structures
Lifecycle Costing
Customer cost & Profitability reporting
Value Chain costing
Capacity cost management
Capital cost analysis

6. TCM TOOLS
TCM tools are deployed in a business to accelerate ‘cost competitiveness’ by generating desirable outcomes of costs, price, value and profit.
Tools also involve technicalities of measuring resources in business with both accounting and non-accounting information
Entire spectrum of ‘cost management’ architecture – measuring, managing, reporting, analyzing, controlling, course corrections, predicting and estimating costs across value chain of business – is enabled by an array of TCM tools.
Contemporary businesses are largely driven by several market and customer dynamics – complexity and variety in business processes, product and customer portfolios.
Businesses manage ‘costs’ associated with both current and future activities and application of TCM tools scopes its deployment accordingly.
TCM tools can accordingly be classified into basic (operational) and advanced (strategic). Operational tools are used for Day-to Day simplistic analysis. Leadership vision of achieving future business goals is addressed through strategic TCM tools

7. TCM TOOLS - OPERATIONAL
Application / Scope
Business Context
TCM Tool
Benefits
Resource control
Business as usual
Variance analysis
Resource conservation
Expense control
Cost driver analysis
Reduction of NVA
Product/Customer quality
Cost of Quality
Minimizing quality deviations
Resource balance
Input-Output balance
Yield improvement
Product cost improvements
Profitability challenges
Kaizen costing
Product profit improvement
Total cost of buying
Total Cost of Ownership (TCO)
Reduced cost of inputs
Operational cost Management
Activity cost management
Resource focus at activity level
Product/Customer
Profitability Challenges
Continuous Improvement
Market place, customer focused assured cost management journey
Overall cost optimization
Linking Talent to Strategy
Performance costs management
People , KRIs and efficiencies

8. TCM TOOLS - STRATEGIC Application / Scope Business Context TCM Tool
Benefits
New product design & development
New product introduction
Target costing
Optimizing 80% of product costs at design stage.
Aspirational cost structure
BC Plan and cost implications
Risk articulated cost structure
Focused strategic initiatives in high risk / high cost areas of business
Total Cost Visibility over product life cycle
Gaining competitive advantage
Life Cycle Costing (LCC)
Economic analysis of alternatives that impact current and future product costs
Customer profitability
Wide customer portfolio
Customer cost & profitability reporting
Customer cost / profitability correction
Value chain of business (Design to Selling)
Creating cost and competitive advantage
Value chain costing
Mapping cost pressures across value chain for rectification
Global cost review
Competitive advantage
Capacity Cost
Significant inputs on strategic sourcing & capacity mgmt.
Optimization of overall capital
Long-term competitive advantage
Capital cost
Different capital movement

9. PRICING STRATEGIES Demand (Skimming) Pricing
Introduction and growth of life cycle
What the market will bear
Works under conditions of no competition
Demand (Skimming) Pricing
Maturation stage of life cycle
Minimum acceptable price
Appeals to a mass market with objective of sales increase
Cost-plus (Penetration) Pricing

10. PRICING STRATEGIES Survival Pricing Market share Pricing
Price remaining capacity at marginal cost
Survival Pricing
Used to take market share from competitors
Market share Pricing
Forgoes sales and profits - puts society first
Social Responsibility Pricing
Formula - DM + DL + 40%
Rule-of-Thumb (Myopic) Pricing
Cover VC only
Buy-in (Foot in the door) Pricing

11. MEASURES OF PRICE MANAGEMENT EFFECTIVENESS
Types of measures include:
Percent improvement of price paid over inflation
Percent improvement of price paid vs. prior year
Target prices achieved
Ratio of actual price change improvement to comparable market index change
Purchase cost improvement as % of cost of goods sold
Total delivered cost reduction
Inventory cost reduction
Transportation cost reduction

12. SUMMARY
A first step to cost management is understanding the total volume of sales and relationship to suppliers costs
Suppliers use different pricing strategies which may not have any relationship to actual costs
A price index is a good way to understand pricing trends
Different approaches to reducing costs are possible

13. Thank you !