Cost can be managed only at the point of commitment and not at the point of incidence.

A firm commits costs at the time of designing the product and deciding the method of production. It also commits cost at the time of deciding the delivery channel (e.g. delivery through dealers or own retail stores). Costs are incurred at the time of actual production and delivery. Therefore, no significant cost reduction can be achieved at the time when the costs are incurred. 

Therefore, it is said that costs can be managed at the point of commitment. Cost drivers are factors that drive consumption of resources. Therefore, management of cost drivers is essential to manage costs. Structural cost drivers are those which can be managed by effecting structural changes. 

Examples of structural cost drivers are scale of operation, scope of operation (i.e. degree of vertical integration), complexity, technology and experience or learning. Thus, structural cost drivers arise from the business model adopted by the company. Executional cost drivers can be managed by executive decisions, examples of executional cost drivers are capacity utilization, plant layout efficiency, product configuration and linkages with suppliers and customers. It is obvious that cost drivers can be managed only at the point of structural and operating decisions, which commit resources to various activities.
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