The International Community for Project Managers (ICPM)

Each year, companies execute projects for the purpose of improving their bottom-line and expanding their competitive advantage. The difference between success and failure often depends on how committed organizations are in utilizing project management to monitor and control schedule delays. Schedule delays are the villain in project management and are the biggest cause of budget overruns, missed deadlines, and poor quality. During good economic times, investing in project management is financially feasible and acceptable by most companies. However, during bad economic times, project management is considered an overhead cost and the tendency is to downsize. This paper discusses the importance of investing in project management to mitigate the impact of schedule delays in good and more importantly during bad economic times.

Given the option, companies would prefer to avoid mistakes rather than to take the trouble to learn from their mistakes. Competition today has reduced the profit margin for most companies. They operate on such thin profit margins that even a small setback can cost dearly.

Therefore, supply chain operating costs must be minimal. This in turn demands that the company-wide supply chain policy be infallible, comprehensive, contemporary and above all cost-efficient. In short, an efficient supply chain policy can be defined as one that generates substantial returns on investment.

In order to achieve this objective, unnecessary external/internal costs must be reduced. One such cost that has the potential for optimization is purchasing costs. Since purchasing costs account for a substantial percentage of the overall production cost (40-60%), it is critical to ensure optimal costs by negotiating for the right price with the supplier.

Activity-Based Costing (ABC) is an accounting system that allocates costs to products based on the resources they consume. The costs of all activities are traced to the product for which these activities are performed. Overhead costs are also traced to a particular product rather than spread arbitrarily across all product lines. The true cost of a product can be determined more accurately with ABC when compared to costs calculated using conventional accounting.

The ABC system can be used for determining the competitive price for a product, developing budgets, estimating future costs and measuring performance. It allows management to understand what increases costs and how to manage them. ABC is a cost accounting system that provides a matrix to accurately calculate the resources consumed by activities and the activities generated for products and processes. This helps assess the efficiency of the company in converting resources into value.

Everyone knows that when a recession occurs, executives tend to look for ways to cut costs, anticipating the possibility that demand for the company’s products and services will drop. Yet what if you could know exactly where your company is profitable and where it's not, allowing you to do more of the profitable work? What if you got rid of unprofitable customers instead of the industrious employees that helped grow the company?