With the changing business environment, optimization and driving efficiencies to provide world-class customer service and enhance asset management is a top priority. Reducing cost (operating and capital) is important but this must not affect the quality of service delivery. The objective must be to control and optimize costs to achieve an organisation’s competitive advantage. At the end of any day, it’s all about getting the right value for money at the most competitive price. Nobody wants to pay more!
Cost Planning: A cost plan is planning the right budget. Ideally a budget should have a schedule of all maintenance, services, management, administration, utilities, repairs, improvements and replacement activities than an organisation must undertake during a given period of time (usually annually). The plan of activities must clearly distinguish between mandatory (must do/essential) and discretionary items (non-essential). Each activity identified must have associated costs that must be evaluated and justified – a reason for its existence.
Whilst historical trend-based budgeting is easy and commonly utilised, many organisations are focusing on zero-based budgeting. In simple words, zero-based budgeting starts from “zero” and numbers are built up based on the organisation’s goals and objectives. Every line item (activity) in the cost plan is detailed, challenged, calculated and justified. This ensures only real costs are budgeted for real expenses.
In addition to the above, cost planning should consider latest market trends, technology, innovations and service delivery requirements.
Cost Data Analysis: In this process, the aim is to understand how and why expenses are incurred. Thus cost data analysis has a direct impact on budgeting and cost control process. Decisions on costs inclusions or exclusions are made based on data analysis. To provide adequate information for decision making, data sources must be established. Some examples of data sources are Computer Aided Facilities Management (CAFM) systems, life cycle reports, maintenance records, energy consumption trends, internal and external cost benchmarking, best industry practices, spares and consumables usage trends, scope and services of suppliers, manpower and productivity, types of assets and usage, financial reports etc.
Employee Engagement and Operations: Employees are the backbone of an organisation, the implementers of any strategy, scope and services. Employee feedback is of paramount importance as they can provide insights on how a job can be best executed. At the same time, adequate training to understand, control and save costs should be provided to ensure overall synergies between the top management and operatives are established. By engaging employees through feedback and training process, the overall operations and maintenance activities are better performed as everyone is focused on driving efficiencies, increasing productivity, providing better services and at the end, cost savings.
Authored by: Mohammad Kaiser Azad CMCA, AMS, PCAM Head of Community Management Emaar Properties PJSC