Wednesday, July 1, 2009

Organizational Cost Drivers Example

Organizational Cost Drivers

Organizational cost drivers influence costs of a company by affecting the types of activities and the costs of activities performed to meet demand for a company's products. In a manufacturing company, previous decisions about plant, equipment, and location cannot be changed when making decisions about organization cost drivers. These must be taken as they are and can be changed with significant investment.

Examples of organizational cost drivers at a manufacturing company:

  • Working closely with a limited number of suppliers 
  • Developing linkages with suppliers
  • Providing employees with cost information
  • Authorizing employees to make cost decisions
  • Reorganizing the existing equipment
  • Designing components of a product so they integrate together
  • Manufacturing on particular equipment
  • Keeping the plant open certain hours

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