Managing Input Cost Volatility is possible if one understands the key four drivers of cost; only then the costs can be addressed accordingly. With fragmented players, competing collectively can help in addressing volatility

1. 1
Managing
Input Cost
Volatility
M Hariharan
Director
Savoir faire
Management Services Pvt Ltd
Navi Mumbai

2. 22
Agenda
 Changing Cost Paradigm
 Sources of Cost Drivers
 Volatility
 Thinking Big

3. 33
Changing Paradigm of Cost
C + P = S
Blessing of Customer – Cost Reimbursement Model
S - C = p
Curse of Competition and Inefficiency
S - P = C
Customer Value Creation and Economic Value Creation
Allowable
Cost
H

4. 44
Sources
of Cost
Drivers
Economic
factors
Design
Operational
Attitudinal
•Price level changes
•Government Policies
•TBL Impact
•Product
•Process
•Supply Chain
•Organisation Structure
•Muda
•Mura
•Muri
•Performance
Measures
•Myopia
•Budget Rigidity

5. 55
Volatility – The reality bites
 It’s the New Normal
 What is true for a swarm is true for a bee
 Struck between rock and hard place

6. 66
Volatility and the Sources of Cost
Drivers
Economic
factors
Design
Operatio
nal
Attitudinal
The New Normal
Parts
Proliferation
Yield and Rejects
?????

7. 77
Volatility – Possible Response
 Hedging
 Strategic Sourcing
 Stock and respond
Size does
matter

8. 88
Thinking Big
 Understanding our Supply Chain Status
 Swarm and the Bee
 Addressing Economic Drivers
 Addressing Design Drivers
 Addressing Operational Drivers
 Addressing Attitudinal Drivers

9. 99
Original Quote
 What is not good for the swarm is not good
for the bee – Marcus Aurelius

10. 1010
Economic and Design Drivers
 Economic Drivers
 Consolidated Cluster Sourcing
 Strategic Source Investments
 Design Drivers
 Cluster Design Initiatives
 Inter-company products Parts commonisation
 Operational Drivers
 Joint Competitiveness Initiatives

11. 1111
to the
M Hariharan
+91-9821160114
hari@sfccostmanagement.com