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Elements and Performance Criteria

1. Analyse total cost components of a product or service
   • Identify all cost components of product or service.
   • Allocate cost components to major categories, such as overhead, depreciation, energy, consumables and labour.
   • Distinguish between costs which directly deliver customer features/benefits and muda (waste).
2. Optimise costs
   • Analyse causes of costs which lead to customer features/benefit.
   • Determine methods of increasing the customer benefit/cost ratio.
   • Analyse causes of muda costs.
   • Determine methods of reducing/eliminating muda costs.
   • Analyse interactions between cost components.
   • Check that one method of reducing costs does not cause an increase in another cost/reduction in consumer benefit.
   • Check that cost reduction plans do not reduce required levels of regulatory compliance or work health and safety (WHS).
3. Implement cost optimisation
   • Develop cost optimisation plans.
   • Negotiate with relevant people to agree on implementation plans.
   • Take actions to implement the cost optimisation.
   • Monitor the implementation of the cost optimisation.
   • Make adjustments to the plan, as required.

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.

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Performance Evidence

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.

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Knowledge Evidence

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.

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