Offensive costing. Get onto it!

Hand on heart: Comparing offers is so yesterday.
No detailed cost analysis = no order.

Buyers these days are looking for worldwide supply security and optimal procurement costs. The competition is stiff. Buyers go over every cost factor again and again with a fine-toothed comb. Standardized methods are used to produce target price calculations, after which the parties hold another round of negotiations. The reward can be savings of up to 20%!

If producers want to compete at the head of the pack, a number of things are expected of them in addition to optimal quality and impeccable delivery performanc:

1. Minimum costs for purchased materials

2. Robust processes and manufacturing costs at a best-practice level

3. Competitive, plausible pricing

Price and cost structure analyses are used to ruthlessly assess each step of the process. The first thing a buyer wants to know is: Which machines? Which cycle times? What labor costs? The following calculations are exacting.

Those who don’t take care here or lose perspective have already lost out. A well-managed cost analysis uncovers everything:

• Greater use of materials compared to competitors
• Differing hourly wages where there are multiple suppliers from the same region
• Any cost advantage in labor-intensive manufacturing in a best-cost country
• Safety and profit margins included in the machine hour rate
• Excessive tool costs in follow-on tools
• Strikingly high surcharge rates for indirect costs

Everything needs to be consistent, from the purchased components to the manufacturer’s own processes to the offer price. The supplier should certainly be accorded a healthy profit; after all, he is expected to deliver reliably to the assembly line going forward as well.

As a manufacturer, cost analysis gives you no less than three major opportunities:

1. Analyze your manufacturing processes and expose the cost drivers in your own price calculation. Now you can adjust the relevant parameters to boost your profits in line with your targets.

2. Successful cost engineering starts during product development. 80% of future product costs are determined in this stage. Make it possible for your design engineers to receive early feedback about how much their designs will end up costing during manufacturing.

3. Win over the buyer and lock in the order at the negotiating table. Send your client a clear message: you are innovative and have your costs fully under control. How? Through a collaborative and “offensive” cost analysis

“Cost analysis should always be understood as an externally driven cost audit that shows, without any ifs, ands or buts, at what points the design or processes need to be changed in order to get the price and quality to match at the end of the day. And let us not forget: In the end, any joint success amidst global competition always comes down to the value chains.
(Norbert R. Heinz)

The poseidon® costing software developed by us has proven to be an indispensable tool for efficiently optimizing value chain manufacturing costs. Identifying cost drivers, evaluating potentials and winning people’s support for the implementation phase – these are the factors flowing into your success.

Winners work with poseidon® – the leading costing system on the market.