BLOG

Cost Modeling Enables Strategic Decision Making in the Organization

Jun 15, 2017

Cost modeling empowers an organization to make strategic decisions based on accurate insights. The advanced cost modeling tool promises precision and high-quality decisions as it takes into consideration material costs, labor costs, facility and maintenance costs, production costs and profit margin to manufacture a product or service. It accounts for differences in process, utilization, capacity, geographical location and all the other factors related to manufacturing or production. Cost modeling enables decision makers to make strategic decisions driven by data and insights. But why is cost modeling important? Here’s why.

Cost Modeling – A Decision-Making Tool

Costs play a big role in the success of any organization. If a business can achieve its product performance target along with curbing its procurement cost, it is said to have achieved cost optimization and production efficiency.  Cost modeling helps in determining the process for new product development, benchmarking operations to achieve efficiency, identifying the manufacturing costs incurred by the suppliers and devising a product pricing strategy. More often than not, business entities have little or no information about the cost structure and pricing strategy of the supplier. The cost modeling technique has the following benefits for production function, procurement function, and the management:

  • Cost modeling enables production managers in new product development as they can understand the impact of various costs on the final product
  • Procurement managers can determine the true cost of manufacturing a particular component or part, compare it with the supplier’s quoted price and further develop negotiation strategies to get the best possible price.
  • The top management gains access to accurate and actionable insights that help in taking well informed business decisions. It helps in budget planning, allocation and planning for future as well.

Cost modeling tools should be able to capture the cost elements that have a significant impact on the overall cost of the product. It should be easy to use and understand the workflow at the granular level in order to provide accurate insights. It can help organizations in devising cost reduction strategies, analyze whether a component is overpriced and negotiate terms with the suppliers. It is beneficial for not only large organizations, but can work wonders for the small and medium sized manufacturing businesses as well. At SpendEdge, we provide real time and accurate insights to the organizations that helps them track price trends of input materials and components which enables procurement professionals to procure the desired product at an optimum price and drive cost saving opportunities.

To know more about how cost modeling analysis, cost modeling tools, cost models in procurement, and pricing models can drive profitability and control procurement costs:

get in touch

 

Recent Blogs

Industries

Services

Getting Down To Business

We are offering Free Trials to all our customers or prospects who have been impacted positively or negatively by Covid-19 and are looking to connect with prospect buyers immediately.

Contact us

Sourcing and Procurement Market Intelligence Services

Products and Tools

Featured

Services Overview

Category Market Intelligence

Supply Market Analysis

Low-Cost/Best-Cost Country Sourcing

Benchmarking

Spend Analysis

Cost Modeling and Should-Cost Analysis

Total Cost of Ownership (TCO) Analysis

Supplier Risk Analysis

Supply Chain Risk Assessment

Supplier Sustainability Assessment

Commodity Price Forecasting

Category Management

Supplier Negotiations

Contract Management

Procurement Store

Purchase Ready-to-use Reports

SEinsightsTM

Our Robust Procurement Platform

BizVibeTM

Suppliers and Buyers Marketplace

SUPPLY MARKET ANALYSIS FOR A METAL MANUFACTURING COMPANY HELPS ACHIEVE ANNUAL SAVINGS OF $15 MILLION

Industries

Industries Overview

Automotive and Tire

Banking, Financial Services and Insurance

Biotechnology, Pharmaceutical and Life Sciences

Chemicals

Energy

Food and Beverage

Industrial and Manufacturing

ICT, Media and Entertainment

Mining, Metals and Minerals

Retail and CPG

Transportation

INCREASING LOCAL PROCUREMENT BY 28% FOR A COMPANY IN THE METALS AND MINING INDUSTRY – A CASE STUDY BY SPENDEDGE

Resources

Featured

Resources Overview

Blogs

Case Studies

Whitepapers

Webinars

Press Releases and Media Mentions

Infiniti Research, Inc. BBB Business Review

Better Business Bureau

Transitioning your category procurement strategy beyond cost-saving and into a strategic function of the organization.

Procurement Trends to Implement in 2023 – Insights by SpendEdge

Over recent years, there have been various industry developments that served as or caused trends in procurement. These procurement trends include technology changes, novel strategic approaches, new processes, and necessary adaptations to change. As supply chains become increasingly complex, procurement has become highly crucial and influential in the production process and continues to grow.

read more

Clients

Featured

Clients Overview

Who We Serve

Case Studies

SUPPLY CHAIN MANAGEMENT HELPS AN IMPORT AND EXPORT INDUSTRY CLIENT ENHANCE SUPPLY CHAIN VISIBILITY

REALIZING SAVINGS OF $15 MILLION IN PACKAGING SPEND FOR AN FMCG CLIENT – PACKAGING SOURCING STRATEGY

About Us

News

About SpendEdge
Why SpendEdge?
Vision, Mission and Values
Clients
Social Impact
Global Offices

Press Releases and Media Mentions

Upcoming Events & Webinars
Request Free Proposal