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CHAPTER 2 PART 2:
SMA - Coggle Diagram
CHAPTER 2 PART 2:
SMA
TARGET COSTING
determines the cost at which a proposed product must be produced, to generate the business desired level of profit
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Disadvantages
- difficult to estimate cost correctly
- limited focus on non-cost factors
- time-consuming process
- difficult to apply to small firms (lack resources & knowledge)
- potential for conflict among dept
Advantages
- customer focused
- cost reduction
- early involvement of all stakeholders
- improved communication
Process
- Market conditions
- Target selling price
- Target profit margin
- Target cost
- Cost reduction objective
- Current cost
LIFE CYCLE COSTING
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Advantages
- comprehensive cost management
- improved decision making
- reduced environmental impact ( reduce energy consumption, waste, improve sustainability)
- enhanced product quality
- improved customer satisfaction
Challenges
- Data availability
- complexity
- resistance to change
-cost
- lack of standardisation (of data)
- time
KAIZEN COSTING
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Implementation
- identify the area of improvement
- form a team
- analyse the current process
- develop and implement solutions
- monitor and evaluate results
- continuously improve
Advantages
- continuous cost improvement
- increased employee engagement
- enhanced product quality
- improve customer satisfaction
- cost savings across the value chain
Disadvantages
- resistance to change
- lack of resources
- difficulty in measuring the results
- limited scope
- lack of leadership commitment
- difficulty in sustaining improvements
VALUE CHAIN ANALYSIS
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Primary Activities
- inbound logistics
- operations
- outbound logistics
- marketing and sales
- service
Support activities
- procurement
- tech development
- HR management
- infrastructure
Advantages
- identifying opportunities for cost savings
- identifying opportunities for value creation
- enhancing supply chain management
- identifying potential risks
- improving decision-making
Disadvantages
- lack of resources
- resistance to change
- difficulty in measuring the results
-limited scope
- lack of leadership commitment
- difficulty in aligning activities