STRATEGIC COST MANAGEMENT...DONT LOOK AT THE TREES LOOK AT THE FOREST

 

Post pandemic the role of the management accountants will change significantly and will demand new levels of maturity and approach towards strategic cost management.   The management accountant profession has now changed significantly during and post-pandemic. The practising profession is at its worst provided as long as we catch up with a traditional model of practices. The job of the management accountants also demands new perspectives from the strategic cost management point hence one needs to understand the sea of changes.  Hard truth but can't close your eyes when the sun is bright. The strategic cost management is going to get a significant heads-up post this pandemic for India.

 The business mindset is going to take sea-level change. Systematic level thinking and holistic thinking are the two critical aspects where the changes will be witnessed. A management accountant will find a stark difference in the business process and will have to help the Indian economy in designing the new business re-engineering models. Taking a step back and re-thinking the whole segment or breaking every segment and then taking a new re-engineering model is going to be the key task.

 The management accountant’s role in this decade will be way beyond the simple Accountant definition fight. The opportunities of change over is now forced action and not a choice game.  The Indian demographic change post covid 19 and the demand for growth brings a new dimension to the profession.  Cost reduction is no longer the subject but cost reallocation through the adoption of technology and improving the value and chain of value is the work for the management accountants.

 For example, the EV market will create one of the new breed of car and bike manufacturers where assembling plants will come under manufacturers backed by Private Equity.  These type of Industries will need new strategic cost management from where a whole new Industry will take birth bringing sea change for climate change aspects.

 The management accountants need to understand that the problem of analysis traps and familiarity trap for strategic cost management. Both tarps create an immense problem of slow and neglected adoption of business changeover.

 Post down the line 2 years many MSME and large corporations will be giving big thanks to the Covid -19 (in terms of business revamp). The strategic cost management has now being compelled to think over the various re-engineering models to drive growth for the business.  But before the business re-engineering is worked upon we need mindset change for the MSME segment. Cost accountants don’t need to look at trees, now it's time to look at the forest. This change of view will not only bring changeover for the MSME business models but also for the profession.

 One needs to bring down the strategic cost management to the system level pulling it out from the board room. Replace box thinking and removing focus from activities or products to the system level will bring the sea change.  The time of cost-cutting is over and now it’s time for strategic cost re-allocation aligning with the shareholders, ESG and for the benefit of the collaborative trade partners.   This thin line of change needs to be adopted and well understood for the survival and growth aspects of a company/organisation or an Industry as a whole. In the next few years, we will witness many new industries coming out from this change of mindset where the traditional business models will be challenged.

 In another example, the real estate market for a commercial rental is at significant risk. The WFH model has brought a prolonged nightmare for commercial real estate. Now the same problem under the familiarity trap can be changed through converting these commercial locations as warehouse and bringing down the supply chain cost of any industry and improving the logistic and consumption for the Indian economy as a whole.  Better logistics and better storage facility improve profitability, usage of ideal assets and improving returns on the asset performance.  In this way we solve the problems of the unsold and unused commercial real state, absorb the excess supply and improve the whole value chain of any industry.  Now we know that REITS plays a critical role behind infrastructure finance and real estate finance. This changeover for the commercial industry of real estate attracts billion dollars of inflow into REITs and brings sea change for the Indian GDP growth.

 Don’t look at the trees, look at the forest.

 Business model re-engineering is not just restricted to a particular company or organisation. Strategic cost management is no longer a value derivation game but creating a new concept of value creation through collaborative business models. MSMEs will need a significant rethinking of business models which can only come up when the management accountants start thinking and gets mindset change of their own.   Gone are the days of traditional strategic cost management. Strategic cost management is no longer restricted to value creation for a particular business/ organisation or one particular industry but for the forest altogether.