BLOG

Cost Modeling – A Major Game Changer For Your Business

Jun 13, 2017

Cost modeling is not a rocket science. It is the analysis of all the direct and indirect costs including labor and material, sales and administrative expenses, investments in research and development, and the profit margins in order to determine the true cost of manufacturing a product or service. Business entities focus on innovating products and service which can easily be imitated by others. For any organization to create a sustainable competitive advantage, it is essential to optimize the procurement and manufacturing costs. Therefore, to determine the factors that drive organizational success, businesses must leverage cost modeling tools that could provide actionable insights to improve the cost performance and identify the cost drivers.

As a result of globalization, supply chains have become complex and highly vulnerable to external factors. Category managers face a multitude of issues such as cost containment, cost estimation, low-cost country sourcing, supply chain integration and sustainability issues among others. Cost modeling not only helps in identifying the cost drivers and cost components but also in taking procurement decisions.

What are the Benefits of Cost Modeling?

To facilitate cost savings and improve efficiency, organizations need to take a cost-based approach. Cost modeling helps organizations to make strategic business decisions such as whether to manufacture a particular component in-house or outsource it to a third-party supplier. This means that if the organization knows what a particular component or material costs, they would be able to determine the price they are willing to pay for it and understand the supplier pricing strategies in a better way. A cost-based approach for an effective supply chain management has multifold benefits as follows,

  • Cost modeling enables business entities to work with few but top-rated suppliers at the best possible prices in the market.
  • Determining the costs of the components beforehand enables procurement to source suppliers and collaborating with them in the design process, thereby ensuring product improvement and a continuous cost reduction.
  • This helps build a robust supplier relationship management as the benefits of a cost-based approach can be reaped by the supplier as well.

Supply chain professionals are well aware of the benefits of adopting cost modeling and predictive modeling tools in their organizations but shy away because they think it is a complex and tedious process. Cost models can help in transforming the cost data into important cost information that could help supply chain management professionals to make better-informed decisions. At SpendEdge, we provide actionable insights on procurement and other spending activities by analyzing various cost and pricing models and determine the factors that drive prices for different products across several regions thereby helping enterprises to identify suppliers offering the best price.

To know how cost modeling, predictive modeling, strategic sourcing and cost estimation can help your business

get in touch

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

COVID-19 Resources

Blogs

Case Studies

Whitepapers

Webinars

Press Releases and Media Mentions

5 KEY CORONAVIRUS RISK ASSESSMENT STRATEGIES TO OVERCOME HEALTHCARE SUPPLY CHAIN CHALLENGES

IDENTIFYING STRATEGIC PURCHASING PRACTICES FOR A COMPANY IN THE US FOOD SERVICE INDUSTRY | SPENDEDGE’S LATEST SUCCESS STORY

COVID-19

Featured

Overview

Buyers

Diagnostic Test Kit

Additional Resources
Contact

A LOOK INTO THE FUTURE OF THE FOOD AND BEVERAGE INDUSTRY AFTER THE COVID-19 PANDEMIC

Identifying the Top 100 Coronavirus (COVID-19) Test Kit Manufacturers Across Regions

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