Management of internal reserves of reducing product cost (on the example of JSC “Plant of Drilling Equipment”)

Abstract

Due to tough competition and economic sanctions domestic mechanical engineering enterprises are in a permanent search of sources of increasing their performance efficiency. One of such sources is the internal potential of a company. Engineering enterprises possess a large stock of internal reserves and their exploitation provides the businesses with competitive advantages in the global market. Internal reserves are the source of a company’s investment. Reduction of production costs at the expense of internal reserves is an important direction of increasing an engineering company’s performance efficiency. Currently, there are no universal methodical tools to manage internal reserves of reducing production costs at the mechanical engineering enterprises. The study is aimed at describing the process of management of internal reserves of reducing production costs which is applied at one of engineering plants. The author outlines the experience of an mechanical engineering company on managing internal reserves of reducing production costs. It is based on the marginal analysis method which makes it possible to find a product with high margin profitability. The author adduces the sequence of all stages of the management process and the calculations on certain types of products, and reveals reserves for reducing production costs according to the directions of search for them. The experience presented in the article will be a good example for the other engineering enterprises and will provide them with the opportunity to reduce production costs and increase their performance efficiency avoiding any borrowed funds.