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Cost control is the measure taken by management to assure that the cost objectives set down in the planning stage are attained and to assure that all segments of the organization function in a manner consistent with its policies. Steps involved in designing process of cost control system.
ü Establishing norms: To exercise cost control it is essential to establish norms, targets or parameters which may serve as yardsticks to achieve the ultimate objective. These standards, norms or targets may be set on the basis of research, study or past actual.
ü Appraisal: The actual results are compared with the set norms to ascertain the degree of utilization of men, machines and materials. The deviations are analyzed so as to arrive at the causes which are controllable and uncontrollable.
ü Corrective measures: The variances are reviewed and remedial measures or revision of targets, norms, standards etc., as required are taken.
Purchase control is an element of material control. Material procurement is known as the purchase function. The functional responsibility of purchasing is that of the purchase manager or the purchaser. Purchasing is an important function of materials management because in purchase of materials, a substantial portion of the company's finance is committed which affects cash flow position of the company. Success of a business is to a large extent influenced by the efficiency of its purchase organization. The advantages derived from a good and adequate. System of the purchase control is as follows.
1 Continuous availability of materials:
It ensures the continuous flow of materials. So production work may not be held up for want of materials. A manufacturer can complete schedule of production in time.
2 Purchasing of right quantity:
Purchase of right quantity of materials avoids locking up of working capital. It minimizes risk of surplus and obsolete stores. It means there should not be possibility of overstocking and under stocking.
3 Purchasing of right quality:
Purchase of materials of proper quality and specification avoids waste of materials and loss in production. Effective purchase control prevents wastes and losses of materials right from the purchase till their consumptions. It enables the management to
reduce cost of production.
4 Economy in purchasing:
The purchasing of materials is a highly specialized function. By purchasing materials at reasonable prices, the efficient purchaser is able to make a valuable contribution to the success of a business.
5 Works as information centre:
It serves as a function centre on the materials knowledge relating to prices, sources of supply, specifications, mode of delivery, etc. By providing continuous information to the management it is possible to prepare planning for production.
6 Development of business relationship:
Purchasing of materials from the best market and from reliable suppliers develops business relationships. The result is that there may be smooth supply of materials in time and so it avoid disputes and financial losses.
7 Finding of alternative source of supply:
If a particular supplier fails to supply the materials in time, it is possible to develop alternate sources of supply. The effect of this is that the production work is not disturbed.
8 Fixing responsibilities:
Effective purchase control fix the responsibilities of operating units and individuals connected with the purchase, storage and handling of materials. In short, the basic objective of the effective purchase control is to ensure continuity of supply of requisite quantity of material, to avoid held up of production and loss in production and at the same time reduces the ultimate cost of the finished products.
Maintenance department has to excercise effective cost control, to carry out the maintenance functions in a pre-specified budget, which is possible only through the following measures. First line supervisors must be apprised of the cost information of the various materials so that the objective of the management can be met without extra expenditure on maintenance functions A monthly review of the budget provisions and expenditures actually incurred in respect of each center/shop will provide guidlines to the departmental head to exercise better cost control. The total expenditure to be incurred can be uniformly spread over the year for better budgetary control. however, the same may not be true in all cases particularly where overhauling of equipment has to be carried out due to unforseen breakdowns. some budgetary provisions must be set aside, to meet out unforeseen exigencies. The controllable elements of cost such as manpower cost and material cost can be discussed with the concerned personnel, which may help in reducing the total cost of maintenance. Emphasis should be given to reduce the overhead expenditures, as other expenditures cannot be compromised. It is observed through studies that the manpower cost is normally fixed, but the same way increase due to overtime cost.
Quality control refers to the technical process that gathers, examines, analyze & report the progress of the project & conformance with the performance requirements the steps involved in quality control process are
Determine what parameter is to be controlled.
Establish its criticality and whether you need to control before, during or after results are produced.
ü Establish a specification for the parameter to be controlled which provides limits of acceptability and units of measure.
ü Produce plans for control which specify the means by which the characteristics will be achieved and variation detected and removed.
ü Organize resources to implement the plans for quality control.
ü Install a sensor at an appropriate point in the process to sense variance from specification.
ü Collect and transmit data to a place for analysis.
ü Verify the results and diagnose the cause of variance.
ü Propose remedies and decide on the action needed to restore the status quo.
ü Take the agreed action and check that the variance has been corrected.
An operational planning is a subset of strategic work plan. It describes short-term ways of achieving milestones and explains how, or what portion of, a strategic plan will be put into operation during a given operational period, in the case of commercial application, a fiscal year or another given budgetary term. An operational plan is the basis for, and justification of an annual operating budget request. Therefore, a five-year strategic plan would need five operational plans funded by five operating budgets. Operational plans should establish the activities and budgets for each part of the organization for the next 1 – 3 years. They link the strategic plan with the activities the organization will deliver and the resources required to deliver them. An operational plan draws directly from agency and program strategic plans to describe agency and program missions and goals, program objectives, and program activities.
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