fm cost center to value center sanjay c
TRANSCRIPT
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CONVERTING A COST CENTER TO A VALUE CENTER…
FACILITY MANAGEMENT
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…IS NO MAGIC
Sanjay ChaudhuriAssociate Vice President
Administration, Facility Management, Infrastructure & Procurement
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Optimizing Business Performance…
by an FM…through....effective…....
Management &
Understanding of…. • Business goal• Space Planning • Delivery Performance • Cost Control
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• Cost Center to a Value Center
• Administrative Cost centers
• Workplace to business performance
• Budget & Inventory Management
• Cost analysis for Decision making
• Financial Reporting & Analysis
• Case studies
• Innovative workplace strategies
Make your Facility generate revenues
Scope of this presentation
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A Cost Center incurs costs (and expenses) directly but does not generate revenues
Cost Center – The basics
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A division of an organization that provides quantified value in terms of cost savings or increased revenue is a Value Center
Value Center – The basics
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ADMIN OPERATED COSTS
Electricity Charges Water Supply
Power Transportation
Communication
DG Hiring Charges
Diesel Travel Electrical Materials
Hospitality
Tea/Coffee Consumption
Drinking Water
Manpower - Electrical Maintenance
HK Material
Management Snacks
Manpower - House keeping
Manpower - Security Petty cash expenses
Plants & Miscellaneous
Courier charges
Printed Stationary
Stationery material
Photocopy
Web Printer
LCD Hiring Charges
Repairs & Maintenance
Mobile Phone Charges
Telephone Bills
Space management
Hotel Stay Airfare- Domestic
Airfare- International
Infrastructure rent
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• Understanding business performance
• Key tools
• Organizational value add through methodical capacity planning
• Workplace strategies
Optimize Space to drive Business Performance
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Space planning
A conjunction of workplace environment and workplace ethics ‘TRANSFORMS’ business houses and the quality of work that the people do.
Appropriate use of intended space
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Capacity Planning
Determining the production capacity needed by an organization to meet changing demands of its products or services
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The work place……a new strategic tool
The concept of workplace is being redefined to keep pace with changes in:
• Organizations
• Employees
• Technology
• Environmental sensitivity
• Culture
• Nature of work
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… to reduce workplace costs and add value to the organization
Various measures to improve the matrices of
• cost per person
• cost per seat
• area per person
have been the fore most challenge of every business house
Innovation is Key…
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Capacity Planning Strategies
Lead strategy
Adding capacity in anticipation of an
increase in demand. It is an aggressive
strategy. The possible
disadvantage is often results in
excess inventory
Lag strategy
Adding capacity only after the organization
is running at full capacity or beyond due to increase in
demand. This is a more
conservative strategy. It decreases
the risk of wastage
Match strategy
Adding capacity in small amounts in
responseto changing demand
in the market.This is a more
moderate strategy.
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FM = Planners
Standards Best Policies & Costs &
Practices Procedures Controls
Addition
Relocation
Reconfiguration
Optimum facility utilization&
Space Inventory by function & use
FM Planning
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• Concepts & types of budget – short or long
• Monitoring & controlling Budget
• Variance Analysis
Budget planning
Budget Sheet
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• Multi level ownership distribution of cost vs. spend
• Top management controls major costs. Fewer cost controllable as one moves down to lower level of management
Hierarchical cost center
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• Understand the importance of budget management and the ways in which it impacts the profitability and spends
• Understanding the concept of managing the various components like inventory, debtors and creditors
• Periodic validation of Assets & inventory which should tally with the Financials
Budget & Inventory Management
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• Analyze product or service performance
• Helps improve decision making
• Cost Concepts
• Activity Based Costing
Cost analysis for Decision making
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Overcoming challenges of a FM
In the current scenario, the role of the FM is under scrutiny - juggling between cost efficiency and value creation
• Large cost centers constantly under scrutiny
• An in-depth knowledge of business costs • An organized tracking, surveillance and storing system
• The system should be compatible to the financial management system
• Cost savings through effective business planning and forecasting
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Deriving the best results – ABC approach
Agility : Action-oriented approachEmpowering and encouraging professionals
Create innovative ideas is the mantra to success
Business Objective : Business Performance measured by its longevity. Profits vs. sales vs. ROI achievement
Coaching : IndoctrinationStrategize the “aim” Define the details of the project
Defining work place costs : Increase productivity at lower costsCommon needs of the customerStrategy to pitch in for new customers Differentiate from our competitors
Elasticity : Adaptability and flexibility Achieve maximum return on investmentHigh-performance workplace is key to survival
Flexibility : Understanding of project flexibility,Internal and external project flexibility
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Case Study - 1
Organization A: A leading BPO in the year 2000 :
Operating out of a total super built area – 210,000 sq ft single unit; Original built out capacity – 1200 seats for proposed future business ran in to full capacity production by the year 2003
Renovated its capacity in 2003 - to accommodate 1400 seats in the same space by altering the working conditions.
Strategy: Resizing work space and furniture.
Impact: Increase in Production capacity by 16%
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Case Study - 2
Organization B: A mid sized software firm till 2004
Operating out of 32,000 sq ft in 4 separate facilities, comprising of 300 seats
Consolidated in to a single unit of 35, 000 sq ft and enhanced their capacity to 600 seats.
Strategy: Change in Technology and resizing work space.
Impact: Reduce overheads, Logistics & Operational costs. increase in profitability due to volume of delivery.
Case study 3
Snapshot of Monthly Costs vs. Savings
# Parameters Unit 1 Unit 2 Unit 3 Unit 4 Total Single Unit Savings
1 Area in Sft 18760 18090 21380 18360 76590 60,000 16,590
2 Monthly rent /sft 27.00 11.64 62.67 24.37 31.42 45.00 (13.58)
3 Rent Outflow 506594 210576 1339957 447462 2504589 2,700,000 (195,411)
4 Total no of Seats 250 236 318 232 1036 1,400 364
5 Employee Capacity 320 540 280 275 1415 2,500 1085
6 Transport cost/person/month 4200 3,800 260000
7 AMC Costs 373482.00 0 373482
8 Contractual expenses 822896.00 662,896 160000
9 Admin Operated Costs 3374087.00 2,715,066 659021
Projected Savings 1,275,117
1 Technology investments 28,150,143
2 Projected Savings 1,422,507
3 Breakeven on Investments 19.8 months
GROSS MONTHLY SAVINGS - 18% 2,697,624
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Thank you