A cost reduction study examines where money is spent and why, then sets out specific, measurable actions. The study distinguishes one-time savings from structural reductions and estimates their effect on margin.
Scope of service
- Spend analysis by cost element and department
- Material yield, wastage and consumption norms
- Energy and utility cost benchmarks
- Procurement and contract terms review
- Action plan with owners and tracking measures
Regulatory framework
- CAS 6 (Material Cost)
- CAS 8 (Cost of Utilities)
- Value analysis and value engineering techniques
Typical professional activities
- Pareto analysis of spend
- Consumption variance study
- Make-or-buy evaluation
- Implementation review after three to six months
Applicable industries
- Manufacturing
- Automobile & Auto Components
- Engineering
- Pharmaceuticals
- Sugar & Agro Industries
- Service Industries
Relevant articles and resources
- Break-even and contribution analysis with a worked example
- CAS-6: measuring material cost
- Knowledge Centre: Management Accounting
The information on this page describes the nature of the service. It is not advice on any specific matter. See the disclaimer.