What are the key skills and tools for effective cost management?

One thing I found helpful is having cost planning start from day one of the project design stage. Cost planning helps understand the baseline and capture any scope changes and its potential commercial impact on the overall bottom line. It helps the project teams understand the cost impact related to design changes.

Cost planning is a skill that extends beyond job responsibilities into daily life. It involves setting objectives, budgeting, and resource allocation. Whether it’s for a project or personal finance, the process requires analytical thinking, clear communication, and effective stakeholder management. These principles are essential for achieving goals and ensuring efficient use of resources in any context.

Cost planning involves incorporating target costing to set cost objectives based on market conditions and industry standards. It requires analytical thinking, communication, negotiation, and stakeholder management to develop a cost baseline and ensure efficient resource use.

Quase toda minha vida profissional em algum momento trabalhei como Cost Engineering e percebo que ainda é um trabalho quase que desconhecido em muitas empresas. O planejamento deve ser envolvido desde a concepção do projeto, esta pessoa inclusiva pode suportar um estimator em diversos dados históricos, de projetos da mesma natureza. Mesmo com uma atuação tão significante ainda percebo pouco conhecimento da função, que envolve tanta analise de dados e conhecimento da saúde financeira do projeto.

Effective cost management relies on a blend of key skills and tools. Strong analytical skills are essential for accurately assessing costs and spotting trends. Proficiency in budgeting and forecasting is crucial for better financial planning. Familiarity with project management software, like Primavera or Microsoft Project, aids in tracking expenses and timelines. Cost estimation tools also enable precise calculations for materials and labor. Communication skills are vital for discussing budgets with stakeholders and addressing concerns. Finally, understanding risk management helps anticipate potential cost overruns and develop strategies to mitigate them, ensuring projects stay on track financially.

Key Skills and Tools for Cost Planning Cost planning defines the project’s scope, objectives, and budget, allocating resources efficiently while considering market conditions and industry standards. Key skills include analytical thinking for accurate forecasts, communication for clear budget articulation, negotiation for favorable terms, and stakeholder management to align expectations. Tools like project management software and estimation databases help establish a cost baseline for effective performance monitoring and control.

Cost estimating involves a variety of techniques to predict the probable costs associated with a project. Here are some of the key methods used in cost estimating: -Expert Judgment: Utilizing the experience and knowledge of experts to estimate costs. Analogous Estimating: Using historical data from similar projects to estimate costs for a new project. -Parametric Estimating: Employing statistical relationships between historical data and other variables to estimate costs. -Bottom-Up Estimating: Breaking down a project into smaller components and estimating the cost of each one. -Three-Point Estimating: Considering three scenarios (optimistic, most likely, and pessimistic) to estimate costs.

Cost estimating also leverages historical data and emerging technologies like AI for more precise forecasts, ensuring project feasibility and profitability.

Key Skills for Cost Estimating Cost estimating predicts project costs using available data and assumptions, ensuring feasibility and profitability. Accuracy is vital, considering uncertainties and risks through contingencies and escalation factors. Essential skills include technical expertise for understanding project specifics, data analysis for reliable projections, proficiency in estimation methods, and risk assessment to account for potential cost impacts and variability.

Cost calculation / estimation plays a vital part of any new project. Not only to calculate potential business cases, but also to compare different design approaches during development. Depending on the stage of the project and therefor needed percision, the following approaches can be taken: - adjusted comparision of similar projects / parts - benchmarks - bottom-up calculations, fed by reference data from databases or existing cost breakdowns. In any case the difference between green- / brownfield calculations need to be appreaciated. While greenfield calculations are not wrong, they tend to be too ambitous. Supplier visits to take the circumstances (layout,..) into consideration are important to reach a realistic calculation.

Este é um ponto engraçado sobre a estimativa de Custos é que o estimator faz sua entrega com base em premissas que teimamos durante a execução dos projetos mudar e isto muda todo o budget orçado. Estimar é quantificar dados que muitas vezes podem ser incertos, e seja qual for o cenário que ele vá estimar, no meio do caminho tanto as mudanças como oportunidades são. Grandes e admiráveis profissionais. E lembrem-se Estimator não é Orçamentista.

The determination of quantity and the predicting or forecasting, within a defined scope, of the costs required to construct and equip a facility, to manufacture goods or products, or to furnish a service. Costs are determined using past experiences and calculating and forecasting the future cost of resources, methods, and management within a scheduled time frame. Included in the costs are assessments and evaluation of risks and uncertainties. Cost estimation provides the basis for project management, business planning, budget preparation, and cost and schedule control

Cost controlling is about keeping a vigilant eye on project expenses, ensuring they align with the budget and goals. It involves regular analysis and adjustment to manage costs effectively. Key skills include project management and cost accounting, essential for maintaining financial discipline and delivering value.

In my experience, cost controls are essential to any project for performance measurement and analyse variances to budget and monitor forecasts. It is necessary to keep track of all changes to budgets, forecasts due to variations. Anticipate any escalations so that they can be accommodated in monthly forecast.

O controle de custo deve monitorar toda a vida do projeto do FEL a Capitalização, ele deve ter um olhar critico e analisar cenários, ele tenta manter os custos dentro do que o Negócio espera, ele tem a capacidade de analisar, gerenciar, fazer analise de indicadores, variâncias, acompanhar cash flow e forecast, andar de lado com a equipe do projeto apontando onde e porque o desvio pode acontecer.

When we talk about cost control, one of the most important control theories and measurement tools comes to mind, which is the term earned value. Earned Value (EV) is a process for monitoring a project’s performance against a baseline. Earned Value Management Systems (EVMS) are project progress control systems that integrate work scope, schedule, and resources to enable objective comparison of the earned value to the actual cost and the planned schedule of the project.

Key Skills for Cost Controlling Cost controlling involves monitoring and adjusting project costs to align with the baseline and objectives. It requires systematic data collection, analysis, and reporting to address deviations or changes affecting costs. Corrective actions ensure the project remains within budget and delivers value. Essential skills include project management for oversight, cost accounting for financial accuracy, variance analysis to track deviations, and change management to handle project adjustments effectively.

Cost optimization is all about cutting unnecessary costs while keeping quality, scope, and schedule intact. By using lean principles and value stream mapping, you can identify inefficiencies and find opportunities to boost value. It involves prioritizing cost-saving initiatives and tracking their impact, relying on skills in problem-solving, innovation, decision-making, and value engineering to make it all happen.

In cost optimization, remember that every contribution matters. Small savings may seem trivial, but collectively, they can lead to a mountain of cost reductions. It’s the sum of these small efforts that can enhance value without compromising quality or scope. Every reduction counts towards the bigger picture of financial efficiency.

Cost reduction activities can be devided by the different domains they originate in: - design driven cost down (CD); this can be everything from a more manufacturing friendly design to the elimination of parts or a design consuming less raw material - process driven CD; starting with typical lean activities you can easily lose yourself in optimizing details or optimizing something not needed, keep asking the question if the whole process can be eliminated or replaced by a different one. Maybe a complete process change requires a supplier change as well, don't limit yourself by the current layout or supplychain. - others: supplychain driven CD; reducing quality costs (process control instead of product control), ...

A otimização de custo era muito mais discutida quando se fala da Engenharia de Valor, em 2011 muito se fala este termo que tem o objetivo de evitar custos desnecessários ou que extrapolam o orçamento, mas não de qualquer jeito, se trata de um processo estruturado de análise e otimização de projetos que ajuda a identificar oportunidades de melhoria e eliminando desperdícios, que é a nossa otimização de custos.

Key Benefits of Cost Optimization - Increased profitability: By reducing costs, businesses can improve their bottom line. - Enhanced competitiveness: Lower costs can make a business more competitive in the *marketplace. - Improved efficiency: Cost optimization often involves streamlining processes and eliminating waste, which can lead to increased efficiency. - Better resource allocation: By identifying and eliminating unnecessary costs, businesses can allocate their resources more effectively.

By implementing effective cost optimization strategies, businesses can improve their financial performance, increase their competitiveness, and achieve long - term sustainability.

Cost tools automate and streamline cost management tasks, enhancing accuracy, reliability, and transparency in data. For product cost estimation, consider using aPriori, which integrates with other systems to improve collaboration and provides detailed cost reports and dashboards.

O Excel é uma excelente ferramenta de analise de custo quando você consegue extrair dados de um sistema, mas por experiência ele não ajuda muito para grandes volumes de informação. O Ecosys da Hexagon ele de fato que surpreendeu é uma ferramenta eficaz para gerenciamento de custo e intuitiva.

While many people might argue "excel" might be sufficient it comes with many downsides. Factors you wanna take into consideration: - structure - standardisation of calculations - UI and clicks required to execute a calculation - collaborative features (real time calculation, comments, permission management,..) - licence costs - availability of viewer licences or export functions - cloud based instead of .exe

Developing cost skills means constantly learning and improving your abilities in managing project costs. It's about staying adaptable and responsive to project demands, seeking feedback and mentorship, and sharing insights within the cost engineering community. Consider pursuing certifications from organizations like AACE or SPCEA to validate your expertise and stay current in cost management practices.

Cost reduction is all about identifying and implementing strategies to decrease expenses and improve efficiency. It’s a systematic approach to cutting down on unnecessary spending while maintaining the essence and integrity of the project or business. By scrutinizing every expense, we can uncover opportunities to save money without compromising on performance or outcomes. It’s a balancing act that requires insight, diligence, and sometimes, a bit of creativity. Ultimately, cost reduction is not just about spending less; it’s about spending smarter.