Production cost control and management in industries are central to organizational sustainability and profitability. The purpose of the study is to reduce the cost of cement production by using operational excellence concepts on the problem identified on Habesha Cement SC; a description of the problem is the increase in product cost. In HCSC the production capacity was below target 54%, the energy cost was 50% of the total production cost, and the raw material used above ranges 1.65 to 1.75 per ton of clinker production. Based on data collection method, secondary information was the basis used in the study. In this regard, data collection is focused on direct cost, and indirect cost, which were direct relation to production cost. The system dynamic model tool used to structure the model, to run simulation and to show the behavior of production cost; the data analysis, presentation, and interpretation based on product cost results on the model. In this, the scenario analysis was used to show the production cost in what manner has relation to the input variables; when input variable reducing on direct and/or indirect cost, that have been done we have seen as well a reduction in production costs. Accordingly, the initial cost, on direct cost (core cost): 10.5 million birrs for supply chain and logistic wastage, 57.03 million birrs for production wastage cost and 2.64 million birrs for energy loss; on indirect cost (operational performance): additional cost was 1.92 million birrs, and 0.0043 million birrs was human resource; in these condition, the production cost was 40 million birrs. Reducing the cost of these inputs from the initial value; Supply chain and logistics decreased towards 4.5 million birrs, production loss to 30 million birrs, energy loss to 1 million birrs, additional cost to 1 million, and human resource to near 0; production cost reduced towards 15 million birrs. Moreover, the validation tests have performed based on historical and simulation data. Among these tests the parameter evaluation has taken as one in the study, which was mean error test, the result which was by comparing the historical and simulation output; in these, the average percentage error is less than 5% validity test in the literature, and this study mean error test result is 3.5% and this indicates the model is valid. Finally, to maintain and improve production costs in cement factories, the company must emphasize product cost challenges and work hard to achieve the goal of the minimization of production cost. Key words: Operational Excellence, Production Cost, Cost factors, Direct Cost (Core Cost), Indirect Cost (Operational Performance), System Dynamics, and Scenario Analysis.