Showing Value (Part IV)

One of the important design choices in building a credible cost reduction tracking system is what should we measure our cost reductions against. There are some basic choices:

• Costs of a baseline year (e.g. the year just before your efforts began)
• Prior year costs (so-called “year-over-year reporting”)
• Business plan (budget) for the current year
• Market

In the most advanced organizations, capabilities exist to do all of the above. What’s right for you will depend mainly on your company’s financial office, and your internal clients.

Another very useful technique is to track progress on individual projects from the initial “identified opportunity” through “on the table” (initial offers), to “final negotiated” results, to “realized benefits.”

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