Product cost dollar

Product cost solved

Sales teams are resourceful when compiling information for customer quotations. They are particularly resourceful when calculating the product cost. Sales use many methods to determine the cost of a product, some of which may be unreliable. This paper looks at a method to resolve unreliable product cost.

The information available to Sales influences the reliability of the cost quoted to customers. Without a reliable, cost base, it is impossible to know if the price quoted returns an acceptable profit.

By working differently, Sales can access accurate product costs which are regularly updated. Eliminating unreliable product costs ensures the company achieves acceptable profit margins on sales. Having confidence in the product cost allows Sales to price competitively when necessary.

 

Problems:

Determining accurate product cost can take a considerable amount of time. Product details obtained from Engineering adds time and cost. Suppliers contacted for prices and technical details add further delays.

Estimation techniques used with varying accuracy can add to the uncertainty of product cost. Incrementing assumed product costs year on year is a primary cause of inaccuracy. Similarly basing the cost of the project on a previous project adds numerous uncertainties.

 

Solution:

Modular products can accept cost attributes. As product components are selected, the cost of the overall product is updated. Standard costs are preferable to the use of actual costs as these are likely to be too volatile. Standard costs are static costs which are periodically managed to ensure that they reflect the usual price paid for a component. Actual costs reflect many factors including quantity, supplier, availability and many more variables. Accurate product cost allows consistent pricing.

 

Advantages from different perspectives

  • Faster delivery of sales quotations
  • More competitive product pricing
  • Accurate product costs
  • Better margin attainment
  • Faster access to financial data
  • Reduced reliance on estimation
  • Accurate product costs
  • Better margin attainment
  • Faster access to financial data
  • Reduced reliance on estimation
  • Accurate product costs
  • Better margin attainment
  • Faster access to financial data
  • Reduced reliance on estimation
  • Easy access and maintenance of product records
  • Accurate product costs

 

Further help and assistance

Gatehouse Design are specialists in product standardisation, product configuration and design automation. We can help companies develop highly effective product strategies, maximising profitability, productivity and customer satisfaction. We can help you achieve accurate product cost and improve the efficiency of your business. Please contact us to discuss any product design related issues that you may have.

There is an offer a free product audit to help identify opportunities for product standardisation, product configuration and design automation. Additionally, Gatehouse Design has published many helpful white papers and articles which are available on this website.

 

The author

Written by Peter Slee-Smith 14/05/2018.

Peter Slee-Smith founded Gatehouse Design in 2012, a Chartered Mechanical Engineer with more than 30 years experience in industrial design. Peter qualified with a Masters Degree and has held senior positions in many leading engineering and product manufacturing companies. He is passionate about product design efficiency and has written many articles on the subject. Based in Littleport just outside Ely in Cambridgeshire, Gatehouse Design specialises in product standardisation, configuration and design automation.

 

 

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