Application
This unit of competency covers the skills and knowledge required to examine the costs of a product or service and determine methods of reducing costs. This unit applies to an individual a who is required to undertake a detailed study of a product or service’s costs, including analysing it by its cost components to determining the best method of lowering the cost overall. This unit differs from MSS405031 Undertake value analysis of a product or process costs in terms of customer requirements, in that it looks at all costs, including overheads and takes a wider and more traditional approach to the cost of the product. Information and cost reduction strategies gained from the application of this unit may support other cost approaches in the enterprise, including value stream costing.
This unit primarily requires the application of skills associated with communication in gathering, analysing and applying information. Problem solving, initiative and enterprise, and planning and organising are required to calculate cost components and determine cost optimisation strategies. This unit also requires aspects of self-management and learning to ensure feedback and new learning is integrated into costing methods.
No licensing, legislative or certification requirements apply to this unit at the time of publication.
Elements and Performance Criteria
Elements describe the essential outcomes. | Performance criteria describe the performance needed to demonstrate achievement of the element. | ||
1 | Analyse total cost components of a product or service | 1.1 | Identify all cost components of product or service. |
1.2 | Allocate cost components to major categories, such as overhead, depreciation, energy, consumables and labour. | ||
1.3 | Distinguish between costs which directly deliver customer features/benefits and muda (waste). | ||
2 | Optimise costs | 2.1 | Analyse causes of costs which lead to customer features/benefit. |
2.2 | Determine methods of increasing the customer benefit/cost ratio. | ||
2.3 | Analyse causes of muda costs. | ||
2.4 | Determine methods of reducing/eliminating muda costs. | ||
2.5 | Analyse interactions between cost components. | ||
2.6 | Check that one method of reducing costs does not cause an increase in another cost/reduction in consumer benefit. | ||
2.7 | Check that cost reduction plans do not reduce required levels of regulatory compliance or work health and safety (WHS). | ||
3 | Implement cost optimisation | 3.1 | Develop cost optimisation plans. |
3.2 | Negotiate with relevant people to agree on implementation plans. | ||
3.3 | Take actions to implement the cost optimisation. | ||
3.4 | Monitor the implementation of the cost optimisation. | ||
3.5 | Make adjustments to the plan, as required. | ||
Evidence of Performance
Evidence required to demonstrate competence in this unit must be relevant to and satisfy the requirements of the elements and performance criteria and include the ability to optimise costs for one (1) or more products or services and to:
analyse all cost components
optimise costs and minimise muda
implement the cost optimisation.
Evidence of Knowledge
Must provide evidence that demonstrates sufficient knowledge to interact with relevant personnel and be able to optimise costs, including knowledge of:
cost component categories
methods of allocating indirect costs and their implications
expressing customer perceived benefit in cost or dollar value terms
major controllable costs for the organisation, and how to control them
types of muda and how to reduce it
benefit cost/ratios, their determination and application.
Assessment Conditions
The unit should be assessed holistically and the judgement of competence shall be based on a holistic assessment of the evidence.
The collection of performance evidence is best done from a report and/or folio of evidence drawn from:
a single project which provides sufficient evidence of the requirements of all the elements and performance criteria
multiple smaller projects which together provide sufficient evidence of the requirements of all the elements and performance criteria.
A third-party report, or similar, may be needed to testify to the work done by the individual, particularly when the project has been done as part of a project team.
Assessment should use a real cost optimisation project for an operational workplace.
Knowledge evidence may be collected concurrently with performance evidence or through an independent process such as workbooks, written assessments or interviews (provided a record is kept).
Assessment processes and techniques must be appropriate to the language, literacy and numeracy requirements of the work being performed and the needs of the candidate.
Conditions for assessment must include access to all tools, equipment, materials and documentation required, including relevant workplace procedures, product and manufacturing specifications associated with this unit.
Foundation skills are integral to competent performance of the unit and should not be assessed separately.
Assessors must satisfy the assessor competency requirements that are in place at the time of the assessment as set by the VET regulator.
The assessor must demonstrate both technical competency and currency.
Technical competence can be demonstrated through:
relevant VET or other qualification/Statement of Attainment AND/OR
relevant workplace experience
Currency can be demonstrated through:
performing the competency being assessed as part of current employment OR
having consulted with an organisation providing relevant environmental monitoring, management or technology services about performing the competency being assessed within the last twelve months.
Foundation Skills
This section describes those required skills (language, literacy and numeracy) that are essential to performance.
Foundation skills essential to performance are explicit in the performance criteria of this unit of competency.
Range Statement
This field allows for different work environments and conditions that may affect performance. Essential operating conditions that may be present (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) are included. | |
Competitive systems and practices include one or more of: | lean operations agile operations preventative and predictive maintenance approaches statistical process control systems, including six sigma and three sigma Just in Time (JIT), kanban and other pull-related operations control systems supply, value, and demand chain monitoring and analysis 5S continuous improvement (kaizen) breakthrough improvement (kaizen blitz) cause/effect diagrams overall equipment effectiveness (OEE) takt time process mapping problem solving run charts standard procedures current reality tree. |
Muda (waste) includes all of: | excess production and early production delays movement and transport poor process design inventory inefficient performance of a process making defective items activities which do not yield any benefit to the organisation or any benefit to the organisations customers. |
Cost includes all of: | the monetary value of expenditures able to be directly identified for supplies, services, direct labour, materials, components, cost of inventory, faults and reworks, rejects/scrap, equipment and other items used in the production of the product allocations and estimates for indirect costs (e.g. indirect labour, rent, energy, water and cost of capital) where a direct monetary value cannot be identified. |
Cost optimisation plans include all of: | application scope (e.g. product/s, services, areas, employees and suppliers included in plan) target costs and target cost reductions implementation period method of monitoring method of communicating progress to stakeholders. |
Sectors
Not applicable
Competency Field
Competitive systems and practices