Study Of Complete Cost Management And Control In Coal Companies

The cost advantage is the core competitiveness for enterprises in the market competition. Since 2012, the domestic coal market turned grim, and the prices of coal products went all the way down. It was followed by significant decreases in the profitability of coal companies, and many of them experienced deficits. Therefore, the survival and development of the coal industry is at stake. Currently, there is a lack of knowledge on cost management and control in coal companies, and the methods for such purpose are also obsolete. To be more specific, the preliminary control is insufficient, cost evaluation is incomplete, and trace of driving factors for cost variation is inadequate. Therefore, it is crucial to establish a complete system for managing and controlling the cost and thereby reduce the cost of coal companies. Based on contemporary researches on the cost management and control of enterprises, this study combined qualitative and quantitative methods, and integrated analysis of historical data and logistic deduction, then investigated the complete cost management and control for coal companies. The aim of the study is to provide theoretical justification for cutting the cost of coal companies, as well as improving the core competitiveness of coal companies.Firstly, the external cost in the whole life cycle of coal products (production, transportation and utilization) was analyzed. The external cost of coal products was divided into two categories, namely, external cost associated with environment and price distortion. Besides, a framework for evaluation of environmental external cost due to atmospheric pollution, solid waste pollution, and damage to eco-system was developed, and some sources of environmental external cost that cannot be easily quantified has been evaluated with the method of pollution damage. By investigating the external cost of coal products, especially during their production stage, the composition of social and environmental costs of coal companies was revealed, and it could help the understand the composition of the complete cost of coal companies. The calculated environmental external cost per ton of coal can provide a reference for policy-making on environmental charges for coal companies.Based on the research on the composition of complete cost of coal companies, an innovative frame and method for evaluating the complete cost was proposed. Starting from the theory of sustainable development and the concept of complete cost, the external costs of coal companies (e.g., environmental and safety costs) in the production stage were internalized, and the composition of complete cost of coal companies were analyzed. At present, the cost evaluation system of coal companies is not complete under China’s current Enterprise Accounting Standards, and improvement is needed for the evaluation method as well. To be more specific, the cost associated with environment, safety, production-conversion as well as capital is absent in the contemporary system. In this regard, a framework for complete cost evaluation of coal companies was developed, and it was then integrated with the operation cost method, i.e., based on operations, it analyzes the motivation of each operation, then obtains the final cost of coal companies. The employment of operation cost method could improve the accuracy and efficiency of information on costs, thus enhance the management of cost by controlling each key node in the production processes. Furthermore, the analysis of driving factors for costs can provide useful information for management and control of cost, thereby increase the precision of cost evaluation of coal companies.The characteristics and influencing factors of the cost of coal companies were subsequently analyzed. The composition of cost of coal companies is complicated, because of the constant change of production workplace, and occurrence and geological conditions of working surface. Therefore, the cost is always fluctuating which results in difficulties in the management of cost. In addition, the cost of coal companies is also characterized by vast amount of initial investment, high vulnerability to natural occurrence geological conditions, large proportion of safety and labor costs in the total cost, and constant variation of cost throughout all production phases. The cost of coal companies is influenced by a number of factors, including the amount of recoverable coal resources, buried depth, thickness, and dip of the coal layer, stability of the ambient rock, complexity of geological conditions and disastrous level of of the coal mine, recovery, scale, location, and service life of the mine, price fluctuation of raw materials, electricity, and loan interest rate, state policies, mining processes, level of mechanization, intensified production, human resource management, and coordination of exploitation, etc. These factors can be further classified as natural, social, technical, and management factors. Detailed analyses of influencing factors for each type cost were presented in this study, and they can provide a reference for estimating and managing the cost of coal companies.Based on influencing factors for cost, a systematic dynamics model was established for the budget of cost of coal companies in this study. The accuracy of estimation of cost plays an important role in the budgeting and management of coal companies. Since the systematic dynamics model is applicable to large-scale and complicated systems, it was used in this study to simulate the cost of coal companies. By correlating each type of cost of coal companies and its influencing factors, the systematic dynamics model was developed to predict the cost of coal companies, thus help control the cost. The model has a complex structure which contains multiple loops, and it is also characterized by high-order, multivariable, highly nonlinear, and multiple-feedback. Meanwhile, the model decomposes the cost of coal companies into resource, capital, production preparation, production, safety, environment, and production-conversion costs. The comparison between predicted result of each type of cost from the model and historical data showed good agreement, which indicates that the model is competent to be used in the cost management and control of coal companies.Finally, this study illustrated the procedures for cost management and control of coal companies, including promoting separation of main bodies of coal companies, reducing the cost increased by society-building; enhancing the awareness of cost management and control among employees, improving the supervision over cost management and control; establishing a system which controls before and during operation while responding after operation; cultivating professionals, accelerating the informatization of cost management and control system; making controlling policies for the production and operation stages based on analysis of influencing factors for the composition of cost of coal companies and simulation results:such as increasing the recovery of coal exploitation, and reducing the resource cost; decreasing production cost by geological data and optimized design result from precise investigation; shortening the construction period, controlling the construction cost, implementing strict construction examination, reducing initial investment of coal companies, while maintaining the quality of mine construction; enhancing control of factors of production, thus reducing the production cost; promoting safety risk inspection with advanced technologies, and increasing preventive safety investments, thereby decreasing the total safety cost; promoting clean production technologies, reducing the environmental cost. Hence, the final objective of cost management and control of coal companies can be realized.