Question: I am finding it
very hard to find information regarding 'cost reduction versus cost
control'. I do not understand the differences and it would be a great help
to me if you could help me understand. Thank you very much.
Signed,
Irish1.
Our
response:
As to your question of
definitions, I use the following definitions in my practice:
Cost reduction: An
organized and intentional one-time (cost reduction project) or continuous
(cost reduction process) initiative taken with the goal to reduce business
costs from a current level to a desired lower level. Cost reduction may
be targeted to one specific cost (account), a selection of costs
(accounts) or organization-wide.
Cost control: A
organized and intentional effort to limit the growth of costs within
specific accounts. The management practice of putting lock limits on
accounts is, in my opinion, an example of cost control. Mandating the
reduction of consumption of a supply or utility is an example of cost
control.
Some people
don't differentiate between cost control
and cost reduction but I tend to consider
cost control to be a reactive measure to stem
cost growth to stay within budget (e.g. overspending in an account) rather
than a proactive effort to actually reduce costs from baseline.
In reality some people do
not differentiate between cost reduction and cost control. I think that
is why you are having a problem with finding examples. But, that said, I
think the best approach is to look at the definitions of the two words -
reduction and control. Those words have different meanings.
