Page 13 - Cost

Interview

Cost Management and Competitiveness

in an Organization

Shri Asim Kumar Mukhopadhyay
Vice- President (Finance)

Tata Motors Ltd

expense management are two focal elements
Q. For deriving the real value of an for value creation. Standardisation plays a
organization, what will be the focal point major role in lowering transaction costs when
of managing costs at an organizational and various links in the production chain are to
transactional level? be connected. It decreases the likelihood of
miscommunication and makes drafing of, and
negotiating on contracts easier. It also enhances
A.Real ‘value’ includes value created not marketability and fastens turnaround times.
just for the company itself but also for all
afected stakeholders like suppliers, employees, Te second element of managing costs is proper
customers and society at large. Tat is how expense management. It refers to a system
sustainability is achieved and that is why deployed by a business to process, pay and
many organizations have started including audit employee-initiated expenses. It includes
'sustainability' in their agenda and value its policies and procedures which govern spending
signifcance. Te organizations which do not as well as the technologies and services utilised
heed to this business philosophy, over a long to process and analyse the data associated
term, start losing relevance. with it. Expense-management automation
is the means by which an organisation can
Also the current environment is such that the signifcantly reduce transaction costs and
business dynamic are changing overnight, improve management control while logging,
markets are getting more fragmented, greener calculating and processing corporate expenses.
initiatives are presenting new challenges,
customers are demanding better than ever Like in many manufacturing industries, most
services and products and above all compliance of cost (as high as 80% in some cases) gets built
to the many new regulations and laws is getting up at the designing stage. Hence, due care and
tougher. Te bottom line is that not much has rigorous eforts need to put in lower one's cost
remained in your control - except one thing base as much as one can. A clear cost target
–‘cost’. Hence, managing cost at all levels has setting – whether, for the whole organization,
become of paramount importance for the product, or even at activity level- helps.
survival of a company in the present times. Firms also need to start viewing their
oferings, whether products or services or their
Te main reason to establish any frm is to avoid combination, in terms of how much value they
some of the transaction costs of using the price provide to the end user. Tis way they could
mechanism. Tus the focal point of managing also arrive at a sustainable cost basis while
costs at an organisational level is discovering creating value for all.
relevantcosts and reduce them (keeping in
mind these can be reduced but not eliminated).
At a transactional level, standardisation and Saving cost is like running a tight ship; even a

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