Management improvement through total cost reduction activity in a small and medium cosmetic manufacturing company: A case study

Abstract

In order for companies to continue to grow and develop in a rapidly changing global economy and domestic working environment, the most fundamental concern is to improve management efficiency through enterprise-wide cost reduction. However, there are no case studies of enterprise-wide cost reduction activities of cosmetic manufacturers. Therefore, this study aims to analyze the company-wide cost reduction activities performed by a case company, an OEM/ODM cosmetic manufacturer, for about 3 years. The TCR activities of an example company can be largely divided into the introduction of a strategic target cost management system and post-cost reduction activities. In other words, a strategic preliminary target cost management system was introduced to calculate the target cost, and to reach the target cost. And then the company-wide improvement activities were promoted to reduce costs in the fields of raw and subsidiary materials, product profit and loss, and labor expenses. For 3 years, a thorough case study was conducted across the entire TCR activities conducted by Company C. In other words, the introduction, activities, evaluation, and follow-up management of TCR were investigated and reviewed for each stage of implementation, and the results of TCR were analyzed. As a result of the study, it was found that C's TCR activity greatly improved the company's operating profit. It was found that C's TCR activity greatly improved the company's operating profit. As of 2019, the company achieved a cost reduction of 23%, including 7% for products, 24% for raw and subsidiary materials, 28% for labor expenses, and 15% for new. Also, the operating profit contribution rate increased significantly to 37% in 2017, 35% in 2018, and 50% in 2019 (3 years average of 41%) The results of this study are expected to become a good benchmark for the introduction and activation of cost reduction systems not only for domestic and foreign industries but also for other industries