Managing Cash Flow

148 Cost Reduction Analysis Procedures
• Idle equipment and/or operations personnel
• Insufficient or excessive equipment
• Excessive production or operating costs
• Lack of effective production scheduling procedures
• Poor housekeeping
• Excessive, slow-moving, or obsolete inventory
• Purchasing
• Not achieving best prices, timeliness, and quality
• Favoritism to certain vendors
• Lack of effective competitive bidding procedures
• Not using most effective systems such as blanket purchase orders, traveling
requisitions, telephone ordering, and so on
• Excessive emergency purchases
• Lack of a value analysis program
• Purchasing unnecessarily expensive items
• Unmet procurement schedules
• Excessive returns to vendors
• Financial indicators
• Poor profit/loss ratios
• Poor return on investment
• Unfavorable cost ratios
• Unfavorable or unexplained cost/budget variances
• Complaints
• Customers: bad products or poor service
• Employees: grievances, gripes, or exit interview comments
• Vendors: poor quality or untimely deliveries
• Production: schedules not met, material not available, deliveries not on
time, poor quality, and so on
Internal Benchmarking Case Study
A company being reviewed decided to earmark specific customers and related
sales forecasts for its product line, XXX business, by salesperson. For the first
quarter of such directed sales planning, the results for the three salespersons were
as follows:
Sales
Difference
Salesperson Forecast Actual $ %
Brown 2,500 4,000 1,500 160%
Gray 3,500 3,200 (300) 91%
White ______ 4,000 _____ 3,600 _____ (400) ____ 90%
TOTALS 10,000 10,800 800 108%