Cost Management - CM

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Few problems threaten the petroleum businesses more than uncontrolled costs. Economic realities have made it necessary for most companies to operate with a "lean and mean" philosophy. Industries previously operating under regulatory rules, which allowed them to pass on all costs to the customer, now face a changed regulatory environment. As the price of our products fluctuates widely, the most vulnerable companies are those that are ineffective in understanding and managing their costs. Historically energy companies have relied on the efficiency of their operations to drive company profitability. The ability to properly manage costs is now paramount in a company's success and even their ultimate survival. As the energy industry goes through its most monumental changes since the 1970s, the companies that can identify efficiencies and inefficiencies will be able to react to the challenges of the global market place, thus generating higher profits. The course will cover costs management from the basics to the most recent events and trends, using relevant exercises, timely case studies and role-playing techniques. This seminar is an introduction to Practical Cost Management techniques designed to help the participant better understand the underlying dynamics of cost, which will lead to better decision making concerning products and services, work flows, capital investments, as well as the day-today monitoring of the business.One personal computer is provided, at additional cost, for each two participants.

Operating managers, field personnel, project managers, technology managers, budget managers, or practically anyone in the company wanting to manage costs in a more efficient and effective manner.A familiarity with finance is helpful but not required.

You will Learn:

Participants will learn how to:

  • Identify the fundamental types of costs and the cost drivers
  • Understand the different cost classifications
  • Trace all relevant costs to a single cost object to better manage costs
  • Determine and monitor the behavior of costs
  • Build your own Activity dictionary
  • Use sensitivity analysis of cost behavior
  • Design management control system that actually works
  • Understand the principles of Activity Based Cost Management (ABCM) and its development and implementation
  • Determine the relevant information for decision making
  • Analyze capital projects using the proper tools and techniques
  • Use and misuse the budget
  • Manage and not mismanage costs
  • Develop tools to use for managing costs
  • Evaluate costs for effectiveness

Course Content:

Defining costs, classifications and terminology in an oil and gas sense

  • Classifying the different costs
  • Determining cost objects, cost drivers and their behaviors
  • Assigning costs for an E&P company
  • Analyzing different types of Cost management systems
  • Measuring activities and their performance
  • Using Activities Based Management (ABM) to monitor costs and processes
  • Building and using an activity dictionary
  • Using value added costs versus non value-added costs for improvement
  • Tying costs to revenues to more effectively measure profits
  • Distinguishing between cost effectiveness and cost efficiencies
  • Using 4 dimensional costs
  • Developing productivity measurements that work

Operating Cost Management

  • Using the budgets efficiently and effectively
  • Using GAP analysis in measuring productivity of costs
  • Support departments cost allocations
  • Transfer pricing
  • Determining the break-even cost and volumes
  • Using variance analysis budget for monitoring performance
  • Measuring and controlling productivity
  • Optimizing the supply chain

Capital Cost Management

  • Capital investment decision making and the effect on cost management
  • Developing and analyzing capital investment projects
  • Replace versus maintain
  • Life Cycle Costing
  • Analytical techniques for managing costs
  • Managing personnel, logistics, purchasing and material costs effectively
  • Sensitivity Analysis for optimizing costs
  • Using different scenarios to more effectively manage costs

Performance Measurement

  • Using capacity management techniques
  • Incorporating HSSE into the cost management system
  • Defining preventive and reactive costs
  • Breaking down the audit of performance management results
  • Raising your own cost management awareness

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