Fm Cost Center To Value Center Sanjay C

Confidential and Proprietary

CONVERTING A COST CENTER TO A VALUE CENTER…

FACILITY MANAGEMENT


…IS NO MAGIC

Sanjay ChaudhuriAssociate Vice President

Administration, Facility Management, Infrastructure & Procurement


Optimizing Business Performance…

by an FM…through....effective…....

Management &

Understanding of…. • Business goal• Space Planning • Delivery Performance • Cost Control


• 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


A Cost Center incurs costs (and expenses) directly but does not generate revenues

Cost Center – The basics


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


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


• Understanding business performance

• Key tools

• Organizational value add through methodical capacity planning

• Workplace strategies

Optimize Space to drive Business Performance


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


Capacity Planning

Determining the production capacity needed by an organization to meet changing demands of its products or services


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


… 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…


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.


FM = Planners

Standards Best Policies & Costs &

Practices Procedures Controls

Addition

Relocation

Reconfiguration

Optimum facility utilization&

Space Inventory by function & use

FM Planning


• Concepts & types of budget – short or long

• Monitoring & controlling Budget

• Variance Analysis

Budget planning

Budget Sheet


• 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


• 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


• Analyze product or service performance

• Helps improve decision making

• Cost Concepts

• Activity Based Costing

Cost analysis for Decision making


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


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


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%


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


Thank you

Documents

Fm Cost Center To Value Center Sanjay C