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Publication date: 1 May 2019

Olav Torp, Ingemund Jordanger, Ole Jonny Klakegg and Yvonne C.B. Bjerke

The purpose of the paper is 1) to address the importance of contingency at the right level when defining project control baseline, including cost reserves / “room to…

Abstract

Purpose

The purpose of the paper is 1) to address the importance of contingency at the right level when defining project control baseline, including cost reserves / “room to manoeuvre” and 2) present proactive uncertainty management as a regime to ensure cost effective management of project reserves and contribute to project success.

Design/Methodology/Approach

The paper is a combination of literature study and quantitative research on how contingency develops during the lifetime of a case project. The investigation into the case project includes document study into quantitative material from the case project. The combination of empirical material and theory makes the discussion robust.

Findings

Unrealistic low cost uncertainty will lead to unrealistic low contingency. The case study from a Norwegian mega project shows a contingency of 15 per cent in addition to expected costs. The case study shows that by continuous opportunity management and risk reduction, the needs for management reserves are systematically reduced and the contingency is controlled.

Research Limitations/Implications

This research is limited to one case study. A higher number of cases are necessary to generalise the findings. However, the authors would claim that the systematic mapping of need for management reserve towards the project contingency, and a continuous uncertainty management system will help to obtain cost effective management. The findings from the case study could be applied on similar cases.

Practical Implications

The case study shows a way of setting contingencies and managing contingencies through systematic uncertainty management.

Originality/Value

Improved management of project provisions will increase the value of future projects.

Details

10th Nordic Conference on Construction Economics and Organization
Type: Book
ISBN: 978-1-83867-051-1

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Servitization Strategy and Managerial Control
Type: Book
ISBN: 978-1-78714-845-1

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Article
Publication date: 1 June 1994

John C. Groth and Michael R. Kinney

The value of a company is a function of many variables. Costs are ofspecial importance since managers can influence costs. Success at costmanagement has a phenomenal…

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9129

Abstract

The value of a company is a function of many variables. Costs are of special importance since managers can influence costs. Success at cost management has a phenomenal effect on value because of the relationships between costs, business risk, financial risk, and valuation. These relationships are non‐linear. Consequently, success in cost management yields amplified benefits in terms of value creation. In a counter sense, shortcomings in cost management result in an intensified eradication of value. Last, improved profits derived from cost management are “higher quality” increments to profits. Interestingly, the same non‐linear phenomenon holds: an increment to profits that results from costs management will have a greater addition to company value than an equal increment in profits that results from higher sales or higher sales price per unit. These reasons attest to the importance of attention to costs in value creation. Focuses on benefits of cost management in terms of: the reduction of business risk; the favourable asymmetric effect on the creation of value; the increased tax benefits since it allows, in fact calls for, an adjustment in the financing of the firm with attendant tax benefits. It offers additional considerations relevant in emerging cost control technologies such as activity‐based costing (ABC) and cost driver analysis. The issues also are consistent with the topical theme of relating organizational activities to value additivity.

Details

Management Decision, vol. 32 no. 4
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 October 1994

Steve R. Letza and Ken Gadd

Managers of contemporary organizations are continually examining modernmanagement techniques with a view to adopting best management practicesand thus gain competitive…

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7020

Abstract

Managers of contemporary organizations are continually examining modern management techniques with a view to adopting best management practices and thus gain competitive advantage. The danger is that managers will adopt a functional stance and consider only narrowly defined management techniques contained within a functional specialism, for example finance or operations management, considering the inter‐functional implications of developing a particular technique. Describes activity‐based costing/management, total quality management and quality costing and considers the extent to which these techniques are interdependent and appropriate for a total quality organization.

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Article
Publication date: 29 September 2020

Nigel P. Grigg

The purpose of this paper is to present a literature review demonstrating that quality and its management are increasingly definable as a balancing act between value, risk…

Abstract

Purpose

The purpose of this paper is to present a literature review demonstrating that quality and its management are increasingly definable as a balancing act between value, risk and cost throughout the value stream, from product/service design to production and delivery, and purchaser decision-making. An original framework is presented showing this interplay across the value stream, referred to as the QVRC framework.

Design/methodology/approach

Content analysis is combined with bibliometric analytics, displayed via temporal graphs and citation networks. Reviewed literature is transdisciplinary, encompassing marketing, operations/quality and psychology sources. Core quality management methodologies are positioned on the framework illustrating their relative contribution to value, risk and cost management.

Findings

The QVRC framework is developed, and used as a basis for classifying models and methodologies associated with quality management. A set of propositions are developed, which, together with the framework, set an agenda for further research.

Research limitations/implications

No literature review can capture the richness of discourses on terms as pervasive as value, risk and cost. This paper aims to present a systematic and reliable sampling of such literature.

Practical implications

The resulting model can be applied to management tools, and to products and services.

Originality/value

Researchers, particularly in marketing, have developed models of value, risk and cost in terms of products and services. However, delivering products that provide the appropriate value, risk and cost trade-off is an operations management problem. This is the first paper to combine value, risk and cost across the value stream showing how this interplay extends beyond product.

Details

International Journal of Quality & Reliability Management, vol. 38 no. 5
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 1 May 1980

David Ray, John Gattorna and Mike Allen

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of…

Abstract

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of these—DISTRIBUTION. The particular focus is on reviewing current practice in distribution costing and on attempting to push the frontiers back a little by suggesting some new approaches to overcome previously defined shortcomings.

Details

International Journal of Physical Distribution & Materials Management, vol. 10 no. 5/6
Type: Research Article
ISSN: 0269-8218

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Article
Publication date: 1 August 1996

Bin Srinidhi and K.R. Balachandran

The traditional view of quality treats it as an economic good which can be developed by incurring costs. Proponents of total quality management have rejected the…

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1541

Abstract

The traditional view of quality treats it as an economic good which can be developed by incurring costs. Proponents of total quality management have rejected the traditional view and stress the complementary nature of cost and quality. Reconciles these two views as different manifestations of the same underlying phenomenon within the same strategic framework. This requires precise definitions of quality concepts such as conformance and performance quality. The organization first examines its current position within this framework. The definitions of quality help sharpen the formulation of strategic objectives and the framework helps in mapping out a policy for moving the firm from the current position to the desired position. In addition, also determines the operating systems of quality management by how quality is defined in the organization. In conjunction with the strategic direction, the operational management procedures facilitate the process of cost management.

Details

International Journal of Quality Science, vol. 1 no. 2
Type: Research Article
ISSN: 1359-8538

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Article
Publication date: 1 October 2004

Christian Stoy and Susanne Kytzia

Nowadays, the so‐called management by objectives (MBO) is used as a management instrument of corporate real estate management (CREM), using cost targets as the yardstick…

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1658

Abstract

Nowadays, the so‐called management by objectives (MBO) is used as a management instrument of corporate real estate management (CREM), using cost targets as the yardstick of CREM success. In Switzerland, CREM success is increasingly linked to cost reductions, with the cross‐company corporate strategy often requiring CREM to deliver a significant reduction in the level of cost. The cost concept used is material for the agreement or stipulation of cost targets. As the presented analysis shows, CREM has, for the most part, only very limited potential impact on costs. In particular, the use of the occupancy cost concept (sum of all imputed costs as well as costs recognised in the profit and loss account) poses a problem. This comprehensive cost type is determined by the following factors, which are in many cases outside the control of CREM: Book value as per balance sheet; Depreciation period of the basic shell structure; Main objective of the owner; Maintenance strategies; Degree of outsourcing of infrastructure management. Therefore, where the corporate strategy centres around cost reduction, CREM must be given the opportunity to control these drivers. This would require the inclusion of CREM in the development of the cross‐company corporate strategy, as otherwise the cost targets would have to be restricted to individual cost types (costs recognised in the profit and loss account). This is the only way to utilise a management instrument, such as MBO, within CREM.

Details

Journal of Corporate Real Estate, vol. 6 no. 4
Type: Research Article
ISSN: 1463-001X

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Article
Publication date: 1 August 2006

Andrea P. Kern and Carlos T. Formoso

Traditional cost management systems adopted by construction firms have many problems, which are widely discussed in the literature: the information provided by them is…

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3455

Abstract

Traditional cost management systems adopted by construction firms have many problems, which are widely discussed in the literature: the information provided by them is usually too late, and tends to be too aggregated and too distorted to be relevant for production management. The main objective of this research work is to propose a project cost planning and control model for construction firms. This model aims to support the development of production management systems, in which cost management and production planning and control can be gradually integrated, in order to overcome the existing limitations of cost accounting systems. The scope of the model was limited to building projects carried out by small and medium sized companies, involved in both product development and production. The development of the model was based on the literature review and also on the results of nine empirical studies conducted in four different Brazilian construction firms. The model suggests the integrated application of three fairly well known cost management techniques: operational cost estimating, S‐curves and target costing. By using this set of tools, it is expected that cost management will become more proactive, and able to deal with the dynamic, uncertain and complex construction environment that exists in most projects. The model was partially tested in two case studies, in which it provided key information for supporting decision making related to design, production planning and contracts with suppliers.

Details

Journal of Financial Management of Property and Construction, vol. 11 no. 2
Type: Research Article
ISSN: 1366-4387

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Article
Publication date: 11 January 2008

Petras Baršauskas, Tadas Šarapovas and Aurelijus Cvilikas

The paper aims to determine and assess the cost positions that mostly impact the company total cost efficiency in supply chain management under theoretical and empirical…

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10443

Abstract

Purpose

The paper aims to determine and assess the cost positions that mostly impact the company total cost efficiency in supply chain management under theoretical and empirical background.

Design/methodology/approach

In the paper, the systemic and logical analysis of e‐commerce expert research made over the past several years was used. For the empirical research, the data of a wholesale company cost structure and processes management was used.

Findings

Major findings allow stating that e‐commerce adoption in business has a positive impact on business efficiency in several areas. The quantitative and qualitative analysis of e‐commerce impact on business efficiency shows that the main cost positions, which directly depend on e‐commerce adoption and use, and experience quite big changes, are average cost of inventory management, the cost of materials ordering process, and the cost of labour.

Research limitations/implications

The presented empirical research confirms the theoretical implications of e‐commerce impact on business efficiency. Using this information, the future research should be made on evaluation of indirect e‐commerce impact on business efficiency.

Practical implications

The empirical research of e‐commerce adoption in a wholesale company confirms that the main areas where e‐commerce has an important positive impact on business efficiency are the cost of inventory management, the cost of materials ordering process and the cost of labour.

Originality/value

The e‐commerce impact on business result analysis is improved by detailed costs, which depend on e‐commerce adoption, analysis and definition of e‐commerce impact on business results, by evaluating the business efficiency in quantitative and qualitative forms.

Details

Baltic Journal of Management, vol. 3 no. 1
Type: Research Article
ISSN: 1746-5265

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