CONTENTS
ACKNOWLEDGMENTS………………………………………………………………………………
LIST OF TABLES………………………………………………………………………………………..
PART 1: INTRODUCTION
1.1. Reasons of choosing the project……………………………………………………
1.2. Aims of the project………………………………………………………………………….
PART 2: CONTENT
Chapter 1: Project background about cost- saving strategies in business
1.1.
1.1.1.
1.1.2.
1.2.
1.2.1.
1.2.2.
1.2.3.
Costs in business……………………………………………………...................................
Definition of cost and manufacturing costs in business…………………………...
Classification of costs in business……………………………………………………………
The importance of cost- saving strategies in business……………………...
Definition of cost- saving in business………………………………………………………
Factors affecting cost- saving in business……………………………………………….
The role of cost- saving in business………………………………………………………….
Chapter 2: Cost- saving in Haiphong Cement Company
2.1. Overview of Haiphong cement company …………………………………………....
2.1.1. The formation and development of Haiphong cement company……………….
2.1.2. Function and task of Haiphong cement company……………………………………...
2.1.3. Organizational structure of Haiphong cement company…………………………..
2.1.4. Advantages, difficulties and development direction of Haiphong cement
company…………………………………………………………………………………………………………..
2.1.4.1. Advantages of Haiphong cement company…………………………………………….
2.1.4.2. Difficulties of Haiphong cement company……………………………………………...
2.1.4.3. Development direction of Haiphong cement company…………………………….
2.2. Cost- saving of Haiphong cement company………………………………….
2.2.1. Classification of costs of Haiphong cement company………………………………..
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2,2.2. Cost management of Haiphong cement company………………………………………
2.2.3. Facts of cost- saving of Haiphong cement company…………………………………..
Chapter 3: Cost- saving of Haiphong cement company
3.1. Labor training and management………………………………………………………….
3.2. Effective production materials, fuels, and energy usage…………….............
3.3. New technology investment…………………………………………………………………..
PART 3: CONCLUSION……………………………………………………………………………..
REFERENCES……………………………………………………………………………………………
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ACKNOWLEDGEMENTS
First of all, I am thankful to everyone who has helped me along the way,
I really appreciate the constant support and encouragement I received from
many people throughout the process.
I would like to first thank my advisor, Ms. Bui Thi Thu Hien, for her
tremendous help and support. I do not think that I would have been able to
complete this thesis without her belief in me, and her enormous support.
I should also like to thanks all staff and managers at Haiphong cement
company for their enthusiastic instructions and help during the time I was on
probation.
Last but not the least, I like to thank my family and friends who always
believed in me, and have been there for me throughout this process.
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LIST OF TABLE
Figure 1.1: Statistics on electrical energy consumption (2012- 2014)
Figure 1.2: Labor structure through age
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PART 1: INTRODUCTION
1.1.
Reasons of choosing the project
After joining WTO, Vietnam‟s economy has been moving into the market
economy. With the government‟s policy, it has created favorable conditions for the
development of the domestic enterprises and the companies with foreign
investment capital. However, it has also provided a competitive environment with
many difficulties and risks. To respond to these challenges, companies have to find
suitable competitive measures for survival and development. So, How can
Vietnam‟s enterprises survive and develop in the market economy? There are
many answers to the above questions, but, the answer to the questions how to
increase profits focuses on cost management. This means that companies need to
cost saving in production to reduce the product cost, attract consumers and increase
competitions opportunities in business. Therefore, we see that cost management
and cost- saving strategies are the best ways for companies to survive and succeed
in their business. Based on the reasons discussed above, I decided to choose the
topic: “Cost- saving strategies of Haiphong Cement Company”.
1.2. Aims of the project
- Give the current status of the cost management in business activities of
Haiphong Cement Company.
- Find the best competition methods for Haiphong Cement Company.
- Give the role and importance of cost- saving strategies of Haiphong cement
company.
- Solutions to cost- saving of Haiphong cement company.
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PART 2: CONTENT
CHAPTER 1: PROJECT BACKGROUND ABOUT COST AND COSTSAVING STRATEGIES IN BUSINESS
1.1.
Costs and manufacturing cost in business
1.1.1. Definition of cost and production cost in business
-
Definition of cost
According to Business Dictionary in 2014 “cost is an amount that has to be
paid or give up in order to get something. In business, cost is usually a monetary
valuation of effort, material, resources, time and utilities consumed risk incurred
and opportunity for gone in production and delivery of good and service. All
expenses are cost, but not all costs (such as those incurred in acquisition of an
income- generating asset) are expenses”.
In addition, according to en.m.wikipedia.org/wiki/cost ( 2010) in business,
retail, accounting, a cost is the value of money that has been used up to produce
something, and hence is not available for use anymore. In business, the be one of
acquisition, in which case the amount of money expended to acquire it is counted
as cost. In this case, money is the input that is gone in order to acquire the thing.
This acquisition cost may be the sum of the cost of production as incurred by the
acquirer over and above the price paid to the producer. Usually, the price also
includes a mark- up for profits over the cost of production. Moreover, more
generalized in the field of economics, cost is a metric that is totaling up as a result
of a process or as a differential for the result of a decision. Hence cost is the metric
used in the standard modeling paradigm applied to economics process.
- Definition of production cost
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A cost incurred by a business when manufacturing a good or product a service.
Production costs combine raw material and labor. To figure out the cost of
production per unit, the cost of production is divided by the number of units
produced. A company that know how much it will costs to produce an item, or
produce a service will have a dearer picture of how to better price the item or
service and what will be the total costs to the company.
According to www.investopedia.com/terms/p/production-cost .asp (2013)
“Business that know their production costs know the total expense to the product
line or how to much the entire process will cost to produce the item. If costs are too
high, these can be decreased or possibly eliminated. Production costs can be used
to compare the expenses of different activities within the company”.
In addition, production cost is the sum of costs of all resources consumed in the
process of making a product.
1.1.2. Classification of cost in business
According to en.m.wikipedia.org/wiki/production-cost (2010): Cost is divided into
three broad categories by the most companies
-
Direct materials cost:
The materials that go into final product are called raw materials. This term is
somewhat misleading, since it seems to imply unprocessed natural resources like
wood pup or iron one. Actually raw materials refer to any materials that are used in
the final product; and the finished product of one company can become raw
materials of another company.
Direct material cost of direct materials which can be easily indentified with the
unit of production.
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According to Business Dictionary (2010) “Direct material cost is the part of
raw materials that can be specifically and consistently associated with or assigned
to the manufacture of a product, a particular work order, or provision of a service".
- Direct labor cost:
The term direct labor is reserved for those labor costs that can be essentially to
individual units of product. Direct labor is sometime called touch labor, since
direct labor workers typically touch the product while it is being made. The labor
cost of assembly line workers, for example, is a direct labor cost, as would the
labor cost of carpenter, bricklayer and machine operation.
Labor costs that cannot be physically traced to the creation of production or
that can be traced only at a great cost and inconvenience, are termed indirect labor
and treated as part of manufacturing overhead, along with indirect materials.
Indirect labor includes the labor costs of janitors, superiors, materials handlers, and
night security guards. Although, the efforts of these workers are essential to
production, it would be either impractical or impossible to accurately trace their
costs to specific units of product. Hence, such labor costs are treated as indirect
labor.
In conclusion, direct labor costs are most commonly associated with products
in a job costing environment, where the production staff is expected to record the
time they spend working on various jobs. This can be a substantial chore if
employees work on a multitude of different products.
- Manufacturing overhead cost:
Manufacturing overhead is the third element of manufacturing except direct
materials and direct labor. Example of manufacturing overhead includes items such
as indirect material indirect labor, maintenance and repairs on production
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equipment and heat and light, property taxes, depreciation and insurance on
manufacturing facilities.
Therefore, direct over cost is expense directly associated with the production of
goods or services, such as for lighting, maintenance, and rent of a business
premises.
In addition, cost is also divided in the following manner:
Classification of costs according to function: According to this classification,
the cost divided into production costs and external costs of production. This
classification is used frequently in financial accounting for calculating product
cost. The classification helps accountants control easily expenses incurred in
different stages of production process, and from that connect responsibilities of
managers with every location costs incurred.
Classification of costs according to cost elements (according to the economic
nature): Costs are divided into: cost of materials, the tools and instruments; labor
costs; depreciation and amortization expenses to control costs for each materials
and no- materials resources consumption during production and then evaluate the
effectiveness of using each resource for making timely adjustments.
Classification of costs according to the relationship between costs and
operation capacity: According to this classification, the costs incurred are divided
into: fixed costs, variable costs and mixed costs. This classification is based on
relationship between costs incurred and fluctuation level of production capacity.
Classification of costs according to operation capacity is the basis for makings
operating decisions and business activities of enterprises.
Classification of costs according to the relationship between costs and object
for gathering costs: Costs structure under this classification includes: direct costs
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and indirect costs. This classification helps to collect and process cost information
appropriately. With the direct costs, accountants directly determine and transfer
entire costs for the object for gathering costs. For indirect costs, accountants need
to gather all costs for objects then select appropriate allocation criteria for each
object.
Classification of costs according to the relationship between costs and the
financial statements: Classification of costs according to this criterion, costs
connive of product costs and period costs. This is the way of classifications
showing relationship between costs and financial statements. This classification
indicates that not all costs incurred affect the profits and losses of the period that
cost incurred. Classification allows an overall assessment of the assets and the
operations of the business enterprise in a period, evaluates results and business
operation in future period.
Classification of costs based on the level of executive control: According to
this classification, the costs of business including: controllable and uncontrollable
costs. The classification has important implications for the management
responsibilities of each department so that businesses can assess management
capabilities and responsibilities of the individual for the costs incurred under their
control.
Classification for analyzing, comparing to choose the optimal business lain: To
serve the information for decision- making processes at all levels of management
in business, costs includes opportunities costs, differential costs, sunk costs, etc.
These are costs that affect the business decisions of the enterprise and help
administrator consider when selecting a business plan.
1.2.
The importance of cost- saving in business
1.2.1. Definition of cost- saving in business
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According to Business Dictionary (2010): The process of looking for, finding
and removing unwarranted expenses from a business to increase profits without
having a negative impact on product quality. Many business managers will engage
in periodic cost reduction drives in order to make their company's operation more
efficient and to boost profits.
The amount of money saved as a result of changes to plans or policies that
reduce the expense associated with a business activity. Cost – saving may also
refer to the changes that generated the saving recorded. Indentifying cost- saving
opportunities can help a business to increase profits, by reducing out flows.
In addition, cost- saving is an action that result in fulfillment of the objectives
of a purchase, at a cost lower than the historical cost or the projected cost to the
performance of the business.
2.1.2. Factors affecting cost- saving strategies in business
In business, there are three main factors affecting the cost- saving
-
The impact of labor productivity.
If labor productivity increase, a company will save money to pay to employees
and managements. Moreover, it will help workers improve their income. However,
the development costs of salaries may slower than the growth rate of labor
productivity. This will bring the appropriate and cost saving in business.
- The impact from investment in the infrastructure contruction
The investment in hotel, equipment and business establishment in a period
would waste the costs for the companies. However, reasonable investment is very
important in proving the quality of service. It can attract customers quickly and
increase profits for the companies.
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- The influence of organizational levels and the manage in business
This factor is an important in production. If a company combining logical
factors in production, they will save costs, because they will use reasonable and
effective from labor, materials, and capital in business.
In addition, there are many other factors can influence costs in the companies
such as: the development of socials, economic, and competition in the market, and
currency rates, etc.
2.1.3. The importance of cost- saving strategies in business
Companies have radically changed the way they act, nowadays, one of the main
objectives while developing the productive and work process is the cost reduction.
Resources are being optimized as much as they can, to try to improve the
efficiency in the productive process so this can make possible a significant cost
reduction to make companies more competitive in this difficult economical
moment that we are facing nowadays.
In business, one of the most important economic criteria is cost. Costs has
always been interested by the management, because it is directly related to the
performance in business. Document of the production costs are also an important
basis to analysis and evaluation criteria of cost or the actual use of materials, assets
and capital of the companies.
Cost planning and implementation of cost- saving measures are very in
production activities. In addition, result of the search for cost- saving strategies to
bring high efficiency in business. This increases the profitability and the ability of
consumers to purchase goods.
In addition, dramatic cost cutting gives you a chance to refine or even
reformulate your company‟s overall strategy. In other hand, cutting costs in cannot
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makes a business weaker or more limited because if the company reduce expenses
in a panic, or without an eye to strategy, they could do great harm to them
company‟s competitiveness. But if these company focus on their priorities and on
future potential, cutting costs can be a catalyst for exactly the change a company
needs.
CHAPTER 2: COST- SAVING IN HAIPHONG CEMENT COMPANY
2.1. Overview of Haiphong cement company
After joining into international organization such as: WTO, AFFT, ASEM or
ASEAN, etc, Vietnam‟ business has been development rapidly and contribute to
national economic development and especially, Haiphong Cement Company in
cement industry.
In recent years, Haiphong Cement Company has great achievements. Usually,
the company improves the quality of product and meet the needs in the market.
With “ Dragon Cement” brand, the factory is proud to be the first cement producer
in Vietnam. In addition, the company always keeps trying to become the leading
company in the national cement industry.
Here is some basis information about Haiphong Cement Company
Company name: Haiphong Cement Company
Head office: TrangKenh- Minh Duc- Thuy Nguyen- Haiphong
Tax code: 0200155219
Website: www.ximanghaiphong.com.vn
Business activities:
-
Production and sales of packing cement and order types of packaging.
- Export and business materials for packaging manufacturing industry
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- Production and sales of cement
- Transportation of raw materials and cement products
- Lease of office, warehouse and dock yards.
2.1.1. The formation and development of Haiphong Cement Company
Haiphong Cement Company was established in fork” Cam” river and canals
“Haly” on December 25 th , 1899 and the company named Haiphong cement
factory. It is the first large cement plant in Indochina by the French construction.
During this period, Haiphong Cement factory is the only facilities in Indochina
where provide cement.
In 1955, Revolutionary government has take over and put into operation to use.
In this time, cement production reached 39 thousand tons. In 1961, factory built
two new rotary kiln lines.
In 1964, with seven lines, plant has provided about 592.055 cement tons. It is
the highest levels in the peace years in Northern. With the help of Romania,
factory was repaired and built three new furnaces in 1996. So, amount of cement
was obtained about 67 thousand tons. On August 1993, according to the
government‟s decision, establishing Haiphong Cement Company and directly
belong to Vietnam cement corporation.
In 1997, because the lines are too old, it did effect the environment in
Haiphong city. So, Haiphong Cement Company has decided to move production
and built new factory in Trang Kenh road, Thuy Nguyen District, Haiphong city.
After then, merging four units as the water Transport, Product consuming
Transport, Mechanicals shop and the Water Repair Workshop into Marie Repairing
Transport Workshop directly under Haiphong Cement Company IN April.
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On November 11 th , 2005 “clinker” furnace of Haiphong Cement Company was
put into production. The old furnace stooped operation. Then, new factory goes
into operation on May, 2006. According to Decision No 866/XMHD-KH,
Haiphong Cement Company decided to stop all operation at the old factory in No
1, Hanoi road, Haiphong city and moved to new factory in Thuy Nguyen district,
Haiphong city. Nowadays, company is complementing some expend market
measures to consumer about 1 million tons per year.
Therefore, with product of high quality and other special types of cement order,
Haiphong cement brand “Dragon” in traditional long been deep in the Vietnamese
people„s unconsciousness South. Picture of Haiphong Cement Company also
associated with the history of country as Ho Chi Minh Mausoleum, Ho Chi Minh
Musium, CauThang Long, Hoa Binh Hydropower… The world‟s only known
Vietnam through the war anti- American, then cement the reputation of dragons to
reach the Far East, Vladivostok ( Russia), Jawa (Indonesia), Singapore, etc. Round
110 years ago, Haiphong Cement Company is the French construction. As the
pioneer in the cement industry in Vietnam, Haiphong cement is also one of the first
plant formed the working class Vietnam. Tens of thousands of people of many
generations of workers Haiphong sticking his whole life, lived, fought, and
sacrificed immediately working in this factory. Even in these difficult time, in
1964, the cement workers still make a creative feat: improving plant capacity from
100 thousand tons per year by design to 592 thousand tons per year to construct
land water.
To sum up, over 110 years of construction and growth, cement has been and
remains the pillar industry in the economy of Vietnam. In 2009, Haiphong cement
company development strategies to 2020 and vision to 2050, which took the core
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cement making industry, Dragon brand quickly become the leading brand in the
consumer choice.
2.1.2. Functions and tasks of Haiphong cement company
- Functions:
+ Production and supply of cement with “Green Dragon‟‟ brand for the
consumer or whole or retail in Haiphong city and other area
+ The company‟ product bring special characteristic. So, company mainly
focus on improving the production technology lines and product of quality. All
activities will help company can able to meet the needs in the market.
- Tasks:
+ Company need to ensure the quality and price of the product
+ Improve and enhance the quality to meet the consumer demand
+ Usually, training to improve the qualification levels for employees and
managements
+ Expansion and development in business activities. Next, company need to
fully implement their obligation to the government such as: financial reports,
payment of taxes, etc…
+ Provide adequate labor protection for workers and ensure the safety of goods
and labor in production with „„safety is the number one‟‟ symbol.
+ Especially, Haiphong Cement Company has always focused on modern
technologies and safe equipment which can protect environment
+ Expand production scales and implementation of product diversification
+ Maintain the number of products on the domestic market and expand product
scales in other area and export cement to overseas market such as: innovative
method of sales, the application of advance technology to improve production, or
cost saving strategies in business.
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2.1. 3. Organizational structure of Haiphong cement company
To ensure the efficiency of manufacturing operations and management in
production, Haiphong cement company has built organization structure which
consistent with the characteristics, function and scale business.
Organizational structure chart is presented as below:
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General
manager
Internal affairs vice
president
Business
vice
president
Product
consumption
market
Office
Permanent
vice
president
Technology
vice president
Electromecha
nical vice
president
Financial
Control
department
Electronic
department
accounting
department
Delivery and
receipt
department
Grinding
workshop
Ho Chi
Minh
branch
Mechanical
department
Labor
organization
department
Engineering
technology
department
Planning
department
KSC
department
Mines
workshop
Materials
department
Quality
management
department
Water
workshop
Stock
Materials
workshop
Guard
department
Planning
departmen
t
Oven
workshop
Inspection and legal
department
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- Functions and tasks of each department:
Chief:
Chief is the one who is the legal representative of Haiphong Cement Company. He
is property owners and investors. He is also the head of project and represent in
negotiations and transactions operations for the company.
In addition, chief must bear full responsibility for operations and issue of Haiphong
Cement Company such as managing, assessing financial plants, etc.
Electromechanical vice president:
He is responsible for managing in the manufacturing sector and some departments
such as: engineering technology department, control centers, occupational safety
sector, mechanical workshop, materials workshop, mines workshop, guard
workshop, water workshop, Auto- electrical workshop, stock, etc.
Technology vice president:
He take responsibility for managing in technical sector and department including:
engineering technology department, control centers, mines workshop, oven
workshop, materials workshop, etc.
Business vice president:
Business vice president take responsibilities in business activities; manages
departments including planning department, consumption centers, delivering and
receiving the product department, grinding and packing workshop.
There are some other departments including:
+ Engineering technology department:
It helps the director manage intensive technology sector and equipment
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+ KSC department:
Here is the experiment to try and assess product quality. In addition, the
department also has the following functions: management of materials quality;
management cement quality.
+ Control centers department:
This room functions as follows: assess management for the company and
employees and direct control of equipment and machinery in production activities
+ Labor structure department:
There are some functions such as: organizations and managements of labor in the
company; policies formation for employees.
+ Financial accounting department:
Here is a room which has functions such as: financial management; monitoring of
all economic or financial activities in the company; organization and
implementation of all accounting issues; economic information and accounting
plan statistic; control of the state economy though statistical and accounting data.
+ Office:
This room helps managers organize and implement all activities such as: save and
manage the document and information
+ Occupational safety and environment:
This room helps managers ensure the safety in production such as: occupational
health, explosion- proof, environmental protection.
+ Mechanical and electrical engineering department:
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