Académique Documents
Professionnel Documents
Culture Documents
Cost Management
2014
Financing Investments and Growth
Barometer
Cost Management
1
Table of Contents
Management Summary
4
4
Introduction 5
Understanding of a Comprehensive Cost Management
5
Procedure and Sample
6
Barometer Cost Management
10
10
11
13
13
17
Bibliography
List of Graphs
19
19
Imprint
Publisher:
Expense Reduction Analysts
Suite 24, 40 Churchill Square
Kings Hill
West Malling
Kent, ME19 4YU
United Kingdom
Strascheg Institute for Innovation and
Entrepreneurship (SIIE) EBS Business School
Burgstrae 5
65375 Oestrich-Winkel
Authors:
Ulf Diefenbach
Thomas Lwer
Christoph Schneider
Nominal fee: 390
Management Summary
To a large extent, companies use their own resources
to finance investments
Companies draw primarily on their internal finances to
fund their investments. 33% of financing needs are generated from profits and depreciation 22% from cost savings. Only 12% of financing needs are covered by bank
loans.
33
Profits
Depreciation
22
Cost savings
12
Machinery
Equipment
34,4
Research
Development
42CEO
28CFO
Bank loans
71,4
29,1
Staff
Cost Management is often seen by companies as a necessary chore, as efficiency efforts in organisations carry potential for high conflict. However, a functioning cost management with a view to the companys success is essential
if not crucial.
Fred Marfleet
Introduction
Organisation
Information
Tools
hard
factors
Cost Efficiency
Culture
Cf similar concepts in Himme (2008), p. 7ff., Himme (2009), p. 1055 ff. and
Kajter (2005), p. 80 ff.
soft
factors
Strategy
Position (in %)
55,3
29,1
Head of
Management
Department/
Board of
Division
Directors
8,0
Employees
3,8
1,7
Line
Assistants
Management to Management
2,1
Others
41,8
45,1
32,1
13,1
7,2
2,5
Management
Controlling
Procurement
Others
Finance
Sectors (in %)
Fig. 3 | Expense Reduction Analysts
23,5
Financial
services
6,8
Logistics
22,5
Manufacturing
sector
6,0
Others
18,7
Mechanical/
Plant
Engineering
4,8
Automotive
industrie
13,5
Retail
Area (in %)
4,4
Pharmaceutical
Chemical
41,8
27,9
5,6
7,2
17,5
CEO
CFO
CPO
Head of
Purchasing
Head of
Controlling
Senior
Department
Employee
N=251, information in %
To make the current Barometer Cost Management data comparable with the previous year, the records were equally weighted based on the previous years
distribution. The variables company size and industry sector and country were used as weighting criteria.
70
67,9
68,9
64,8
62,5
62,5
60
Fig. 4 | Expense Reduction Analysts
Barometer Cost Management
50
Max. 100
2012
2014
73,2
74,0
71,0
Strategy
67,8
69,0
65,7
Organisation
Information
61,1
64,2
64,6
64,9
64,2
67,6
Culture
55,2
>5.000
N=251
2013
Tools
100-250
251-500 500-1.000 1.001-5.000
Size of companies by number of employees
65,4
66,0
63,0
<100
58,8
59,4
For details of the methodological construction of the Barometers Cost Management: Expense Reduction Analysts / EBS Business School (2012).
the emerging Asian countries; however an alternative approach could be in an efficient and ongoing cost management.
67,8
67,5
67,4
Automotive
industry
Other industrial
sectors
66,9
Others
65,4
Financial services
65,1
Overall
65,0
Logistics
61,2
Retail
59,2
Pharmaceutical /
Chemical
Machinery /
Equipment
N=251, information in %
Companies characteristics
7
5
2
8
10
0,0
Low specificity
Strong action
Low specificity
Low action
0,1
0,2
Strategy
3
Organisation
High specificity
Strong action
Information
High specificity
Low action
Tools
Culture
Activity of companies in the five key fields in relation with cost efficiency
0,3
0,4
0,5
Comparatively, companies use IT-based information systems (7) to monitor cost efficiency and to evaluate (field:
Information). The staffing situation (4) in cost management is mainly described as sufficient (field: Organisation). For both factors however, there is only a moderate
relation to cost efficiency to be seen.
Two aspects from the key field Culture were highlighted,
but these are achieved only in practice by a minority of
companies: the creation of individual incentives for employees to contribute to the increase of cost efficiency (9)
and regular visits of the employees to training seminars
in the field of controlling (10). Both aspects have only a
relation to cost efficiency moderate to mild, which can
be attributed to the fact that cultural patterns aimed at
peoples behaviour achieve the desired effects not on the
short but on the long term.
The Automotive and Pharmaceutical/Chemical industries especially see savings potential in Energy
19
18
15
12
11
11
Automotive
industry
Pharmaceutical 55 45 18 9 27
& Chemical
Packaging
Insurance
Print costs
Office supplies
Services
Logistics
Waste
Management
Cleaning
Security
Merchant
cards
Machinery /
Equipment
Retail
Uniforms
Other
industries
10
Telecommunications
Equipment
Factory consumables
Facility Management
8 8 25 25 25 0
Freight
In 2012 and 2013, questions were asked regarding the most important cost
categories; this year it was decided to ask questions about the cost categories where the biggest savings potential lies.
Maintenance
Fleet
67 33 50
Marketing
25
Marketing
Energy
25
Travel
Managment
Travel management
30
Logistics
Logistics
30
IT
IT
31
Energy
0 18 18 45 9
21 39 0 32 29 23 14 21 4 23
41 24 29 18 12 35 18 24 12 12
30 26 45 40 19 9 19 2 15 9
19 31 53 13 16 34 13 22 9 13
32 19 26 23 23 19 28 6 15 6
70
46
32
1
Not at all
satisfied
No 8%
73
59
5
Very
satisfied
Yes 92%
27
N=215
5%
16
5
0
Not at all
satisfied (1)
Very satisfied
(5)
11
All companies surveyed in the Automotive and Pharmaceutical/Chemical industries perform cost reduction processes
100
Automotive
industry
100
Pharmaceutical
& Chemical
93
Other industries
94
Logistics
92
94
Machinery /
Equipment
88
Overall
Retail
87
Others
N=251
Companies generate on average 5.6% additional financial resources based on their annual turnover
through cost reduction measures
6,8
Logistics
6,6
Financial
services
6,0
Automotive
industry
Number of companies in %
5,9
Others
5,6
Overall
38,8
29,3
24,1
7,8
5,2
Other industries
0-2%
3-5%
6-10%
5,1
Machinery /
Equipment
4,8
Pharmaceutical
& Chemical
4,4
Retail
>10%
N=251
12
50
44
+57%
39
40
Number of companies in %
Business efficiency is a prerequisite for companies in order to survive within a global and dynamic competition. It
is also one of the main goals of cost management, where
activities are directed to use valuable resources such as
materials or staff as efficiently as possible. The companys
liquidity will increase through savings and the level of
prices of their own range will remain competitive. At the
same time, the scope for the financing of investment increases. In our 20117 study on overhead costs, we found out
that funds generated through cost reduction programmes
were however less used for investment than to increase
the companys profit. The topic of financing investment
and growth will form a more extensive analysis in the current Barometer Cost Management than in the previous
one, where the purpose, object and goal of investment
projects and the financing methods used are at the centre
of the observations.
30
28
20
17
19
13
10
2012
2013
Decreased
Increased
2014
(planned)
N=251
Investments
The volume of investments has risen sharply since
2012
The total volume of investments for the companies surveyed has risen sharply since 2012: in 2012, 28% of companies report higher volume of investments, in 2014 there
are 44% already, which represents an increase of 57%.
Then again, 19% of companies have reduced their investments, when in 2012 it was 17% which represents an
increase of 12% (see fig. 15).
13
Investment in
tangible assets
71,4
Machinery / Equipment
16,4
Property
8,9
Shares
Financial investments
Stocks
0,9
Acquisitions
34,4
Personnel
Patents
Licences
11,3
29,1
3,3
1,4
14
Whilst diversification investments are found almost equally in all industry sectors, the Automotive and Pharmaceutical/Chemical industries focus on rationalisation investment for their machines or systems. In the Service
sector and in other Manufacturing industries replacement
investments are primarily observed. Logistics, Retail and
Machinery/Equipment have planned increased expansion
investments in 2014.
Expansion investments
e.g. increase in production capacity,
additional retail space
Net investments
17
17
4
9
Replacement investments
24
26
Rationalisation investments
e.g. replacement of a technologically obsolete machine
or system
17
16
Diversification investment
e.g. addition of new product lines Entry into new markets such
as regions
18
13
2014 planned
2013
14
No investment projects
13
N=251
Automotive
industry
Pure replacement investments
17
Diversification investments
25
Expansion investments
Pharmaceutical Services
& Chemical
27
33
18
19
Logistics
Retail
12
13
Machinery /
Equipment
19
Other
industries
21
24
20
21
13
29
33
26
16
Rationalisation investment
42
55
18
19
18
Property /
Construction investments
10
No investment projects
17
18
13
11
20
N=251, information in %
15
Rationalisation and increasing the companys turnover are the main goals of investments
The fulfilment of compliance standards, such as regulatory requirements, does not affect all companies in
equal measure. With increasing regulatory requirements
passed by legislation, the Finance and the Logistics sectors are confronted, since the financial crisis, to increasing requirements regarding emissions and safety aspects,
something also reflected in the investment objectives per
sector (see fig. 20).
Revenue increase
71
48
Technical innovation
32
Innovation / R&D
31
12
8
Other objectives
9
N = 251, information in %, max 3 entries
Automotive
industry
Revenue increase
67
Pharmaceutical Services
& Chemical
Logistics
Retail
Machinery /
Equipment
Other
industries
100
65
50
82
71
71
50
36
44
43
36
64
51
50
36
33
32
33
27
58
73
25
0
8
0
13
9
0
0
14
0
14
41
20
21
14
16
18
21
4
13
4
14
13
4
16
Financing
In order to finance their investments, companies have
various options at their disposal, which can be systemised
according to different criteria. Besides the duration of provision of capital, the sources of capital and the legal status
of the investor are the most common classification criteria
to differentiate the types of financing. As to the sources of
capital, there is a distinction between external financing
i.e. external investors lead the company to financial resources, and internal financing, i.e. the financial resources
generated by the company itself.
A further type of systemisation distinguishes the companys perspective from that of the shareholder. This is
where the criterion of the legal status of the investor is
based, i.e. whether the company will have financing from
equity or borrowed capital. Similarly, we speak in this context of self-financing and external financing. A classification
arranged according to these criteria is shown figure 2110.
External financing
Self-finance
Equity financing
Finanzing through
issues of shares
Public funding
Financing through
mezzanine capital
Financing through
rationalisations / savings
Borrowed finance
Bank loans
Leasing
Contracting
1 (little used)
Venture capital
Issuing of shares
Self- and
borrowed
finance
Borrowed
finance
6 9 5 3 23
5 5 22 14
Profit / Depreciation 1 12
33
Cost savings
14
32
Public funding
13
Leasing
14
Bank loans
12
Contracting
10
15
15
14
95
49
27
14
87
Internal
financing
10 1 39
19
Issue of bonds 3 6 3 2 14
10
16
17
60
11
11
55
External
financing
6 2 32
Increasing intensity of use
N = 251, information in %
11
17
Translated into the proportional volume of the individual financing tools12 33% of the overall funding is covered through profits and depreciations; 22% from cost
savings(see fig. 23). These results underline the high importance of internal financing in the provision of capital.
Self-finance
Profit / Depreciation
33
Venture capital
Issuing of shares
Self- and
borrowed
finance
Borrowed
finance
= 39%
4
2
22
Cost savings
6
Public funding
= 28%
12
Leasing
12
Bank loans
5
Contracting
Issue of bonds
= 31%
12
18
13
Bibliography
Becker, Hans Paul (2013): Investition und Finanzierung:
Grundlagen der betrieblichen Finanzwirtschaft, 6. Aufl.,
Wiesbaden.
Deutsche Bank Research (2014): Argumente fr eine
quantitative Lockerung der EZB, Frankfurt/Main.
Ermschel, Ulrich/Mbius, Christian/Wengert, Holger
(2013): Investition und Finanzierung, 3. Auflage, Springer,
Berlin/Heidelberg.
Expense Reduction Analysts GmbH/EBS Business
School (2011): Nachhaltigkeit von Reduktionsprozessen
im Gemeinkostenbereich Studie zur Umsetzung von
Kostenreduktionsprogrammen und Nutzung der eingesparten Potenziale, Kln/Oestrich-Winkel.
Expense Reduction Analysts GmbH/EBS Business
School (2012): Barometer Kostenmanagement 2012. Kostenmanagement in Krisenzeiten, Kln/Oestrich-Winkel.
Expense Reduction Analysts GmbH/EBS Business
School (2013): Barometer Kostenmanagement 2013. Studie zur Kosteneffizienz im Unternehmen und deren Erfolgsfaktoren, Kln/Oestrich-Winkel.
Franz, Klaus-Peter/Kajter, Peter (Hrsg., 2002): Kostenmanagement Wertsteigerung durch systematische
Kostensteuerung, 2. Auflage, Schffer-Poeschel, Stuttgart.
Gleich, Ronald/Michel, Uwe/Stegmller, Werner/
Kmmler-Burrak, Andrea (2010): Moderne Kosten- und
Ergebnissteuerung, Haufe-Lexware, Mnchen.
Grfer, Horst/Schiller, Bettina/Rsner, Sabrina (2014):
Finanzierung, 8. Auflage, Erich Schmidt, Berlin.
Himme, Alexander (2007): Erfolgsfaktoren des Kostenmanagements Empfehlungen fr Kostenmanagementprojekte, in: Projektmanagement aktuell, no. 4, p. 16-23.
Himme, Alexander (2008): Erfolgsfaktoren des Kostenmanagements Ergebnisse einer empirischen Untersuchung, Arbeitspapiere des Lehrstuhls fr Innovation,
Neue Medien und Marketing der Universitt Kiel.
Himme, Alexander (2009): Kostenmanagement Bestandsaufnahme und kritische Beurteilung der empirischen Forschung, in: Zeitschrift fr Betriebswirtschaft,
79. Jg., p. 1051-1098.
List of Graphs
Fig. 1: The Key Fields of the Barometer Cost Management, p. 5
Fig. 2: Sample distribution of respondents and companies, p. 6
Fig. 3: Responsibility in Cost Management, p. 6
Fig. 4: Barometer Cost Management, p. 7
Fig. 5: Barometer Cost Management by company size, p. 7
Fig. 6: Barometer Cost Management per sector, p. 8
Fig. 7: Activity of companies in the five key fields in relation with cost efficiency, p. 8
Fig. 8: the cost elements with greatest savings potential,
p.10
Fig. 9: Most important indirect cost categories per sector, p. 10
Fig. 10: Reduction processes and satisfaction, p.11
Fig. 11: Satisfaction with cost reduction processes and
comprehensive cost management, p. 11
Fig. 12: Reduction processes per sector, p. 12
Fig. 13: Volume of savings from the reduction processes,
p. 12
Fig. 14: Savings per sector, p. 12
Fig. 15: Variations in investments compared to previous
years, p. 13
Fig. 16: Proposed investment projects, p. 14
Fig. 17: Main purposes of investment projects in 2013
and 2014, p. 15
Fig. 18: Planned investments 2014 per sector, p. 15
Fig. 19: Investment objectives, p. 16
Fig. 20: Investment per sector, p. 16
Fig. 21: Types of financing and financing tools, p. 17
Fig. 22: Financing of investments, p. 17
Abb. 23: Distribution of types of funding, p. 18
19
www.expensereduction.com
20
www.ebs.edu/siie