Zero based analysis for cost control

07 Nov 2018


Recently a technique from the 1970s has been revived to look at how to analyse and reduce costs, the technique involves building up a cost plan (or budgets) for an operation from the ground (so zero) without pre-existing assumptions or impacts from pre-existing conditions.  So if you want to do what you do today and had a green field (or a blank piece of paper) what would it look like and cost ?

When done, this analysis can be compared with the actual and the differences investigated (so by business unit, activity, materials, labour or whatever).

From this specific areas can be challenged to meet best practices or justify the differences.

It seems simple enough however getting the data together in a meaningful way and genuinely not being distracted by the actuals is quite difficult.   Understanding the intricacies of a specialised sector like pharmaceutical manufacturing requires specific expertise or the answers will be misleading.

Although often performed by accountants there are specific issues around pharmaceutical operations which mean that specific measures can’t be avoided (for example the QA function is frequently much larger than other sectors due to the regulatory environment).

If you would like to know more or discuss get in touch via the usual channels.

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