Cost Model Analysis Helps a CPG Industry Client to Identify Key Cost Elements
Category Overview Over the years, CPG industry players have started witnessing relentless pressure from competitors, which has compelled them to rely on cost-cutting solutions as a strategic choice to enhance their profit margins. With the prominence of challenges such as the slowing GDP growth and weakening currencies, the consumer’s enthusiasm toward CPG has narrowed down drastically. […]READ MORE >>
Over the years, CPG industry players have started witnessing relentless pressure from competitors, which has compelled them to rely on cost-cutting solutions as a strategic choice to enhance their profit margins. With the prominence of challenges such as the slowing GDP growth and weakening currencies, the consumer’s enthusiasm toward CPG has narrowed down drastically. To better understand the tastes and preferences of the customers and devise an effective cost-benefit strategy, leading organizations in the CPG industry are advocating the need for cost analysis solutions. Effective cost analysis helps businesses make an accurate forecast of their spend to understand if the benefits outweigh the project costs.
With years of expertise in offering a variety of procurement market intelligence solutions, SpendEdge’s cost analysis solution helped the client understand the cost structure to achieve better cost savings. Moreover, cost analysis also helps the client facilitate comparison of the model in terms of the information assets they handle, the curation activities they address, and the effective ways to break down costs.
The Procurement Pain Point and Insights Offered
A renowned client in the CPG industry was facing a predicament in identifying their key cost elements. Also, the client wanted to understand the current model and effectively calculate and compare financial information. With the help of a robust cost analysis, the client wanted to assess the impact of each cost drivers on the overall cost and negotiation strategies adopted by suppliers to ensure low-cost raw material sourcing.
To identify the key cost elements, the client approached SpendEdge’s cost modeling analysts. SpendEdge’s cost analysis experts carried out an extensive research comprising of interviews and discussions with leading stakeholders in the CPG industry space. Furthermore, to gain relevant insights into the market landscape, the experts compiled information from various proprietary sources such as paid industry databases, company presentations, media forums, and news aggregators.
To overcome the aforementioned challenges, SpendEdge’s cost analysis experts helped the client devise an effective quantitative cost analysis strategy and further recommend plans to attain the lowest cost mix. The client was further able to gain a fair idea of the costs in terms of direct and indirect costs, opportunity costs, intangible costs, and the cost of potential risks.
Key questions answered in this cost analysis include
With the help of this cost analysis engagement, the client was able to identify the most cost-effective countermeasures. Furthermore, the analysis assisted the client to increase savings and make informed business decisions. The client was also able to understand the annual average loss expectancy and the cost-benefit of countermeasures.