Tag: cost analysis


Cost Model Analysis: Assessing the Impact of Each Cost Driver on the Overall Cost and Ensuring Low-cost Raw Material Sourcing for a Food Packaging Company – SpendEdge

The Business Challenge

The client, a renowned company in the food packaging industry in the US, was interested in developing a cost model analysis process for their company. The aim of this process was to handle and store at least 1000 units of packaging materials in the inventory. They wanted to assess the impact of each cost driver on the overall cost and gain detailed insights into the costs incurred by their packages to increase the value proposition for their customers. Furthermore, with the aid of a cost model analysis engagement, the client wanted to identify cost elements incurred by their products in the inventory.

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Solutions Offered

To conduct a cost model analysis study for the client, the experts at SpendEdge adopted a comprehensive two-step research methodology, which involved primary and secondary research coupled with scrupulous qualitative and quantitative data assessment techniques. This enabled the client to manage their inventory and supply chains more efficiently.

In a span of three weeks, the client obtained comprehensive insights into the costs incurred by their own packages in material inventory, enabling them to increase the value proposition towards their customers. The cost model analysis also helped the company to determine the total cost as well as cost per activity cost for 1000 units of material. The analysis helped the client to understand negotiation levers adopted by suppliers and ensured low-cost raw material sourcing.

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Key Findings

The cost model analysis helped the food packaging company to identify the key cost elements and determine the costs associated with individual activities carried out in material inventory. They also found out that external storage was a more financially viable solution than internal storage, especially for materials that are stored for a long period of time. Additionally, the client was able to explore the possible cost-saving opportunities and reduce costs related to the packaging system by 19%.

What is the Purpose of Cost Model Analysis?

For businesses to outclass their competitors, it has become imperative to get the most out of every idea, option, and investment. The cost model analysis helps companies to identify the benefits of a business strategy and the costs associated with it. Also, it allows companies to assess the impact of each cost driver on overall cost and help them to negotiate levers adopted by suppliers to ensure low cost raw material sourcing.

Ever wondered how the best in class companies are utilizing cost model analysis engagement? Request a free demo and know how our experts can guide you in conducting a precise total cost analysis.

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Best Practices for Cost Benefit Analysis

Cost benefit analysis is basically a technique that is used to analyze business decisions. More precisely, it is used to compare the total costs of a project or a program and the benefits derived out of it. Cost benefit analysis helps choose the best approach and evaluate the quantitative and monetary impact. As a result, it can be said that cost benefit analysis helps in deriving the factors, which influence the business in the short and long-term.

According to the experts at SpendEdge, “cost benefit analysis helps the management to gain knowledge about pricing strategies and its effect on the supply chain; thus, helping build strong supplier relationships and driving profitability.”

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Answers to the questions

Cost Benefit Analysis for a Leading Player in the Mining Industry – A SpendEdge Case Study

Business Challenge

The mining industry client was facing challenges in identifying the most cost-effective blend of counter-measures to save themselves from a potential loss in the coal production category.

About the Client

One of the fastest growing mining industry firms, employing over 1500 professionals across various economies. Their main objective is to enhance value for stakeholders by discovering, acquiring, developing, producing, and marketing mineral resources profitably, especially in the segment dealing with coal production.

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Engagement Overview

A leading firm in the mining industry, specializing in the coal production category, was looking at developing a cost model for realistic apportionment of costs incurred for each product and sub-products that are part of the operation. To do so and to enhance business efficiency, the client approached SpendEdge to help them leverage cost benefit analysis based solutions. A detailed quantitative analysis of various cost factors within the supply chain network was carried out to identify the indirect and direct spend categories.

Benefits of the Engagement

The cost benefit analysis engagement helped the mining industry client to understand the economic impact of inappropriate business decisions. The developed cost benefit analysis model helped them control indirect costs and save themselves from a potential loss. Our cost benefit analysis experts worked as an extension of the firm to uncover major opportunities for improving their sourcing strategies by controlling indirect and direct spend.

Importance of Cost Benefit Analysis in Procurement


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Leveraging Cost Model Analysis for a Leading Player in the Food and Beverage Industry, Specializing in Manufacturing Processed Foods

Processed foods include food items that have been altered in some way during preparation. Not all processed foods are unhealthy, but some processed foods may contain high levels of salt, sugar, and fat. Food processing may be classified into the following categories:

  • Freezing
  • Canning
  • Baking
  • Drying

The global processed foods sector is a major segment of the food and beverage industry. Processed foods manufacturing companies generate revenue from the sale of food and ingredients to a whole host of customers, ranging from supermarket chains to restaurants and other players further down the processing chain. Processed foods have, on average, delivered highrequest free proposal single-digit annual total returns with much less volatility than the broader market indexes.

The Business Challenge and Journey

The client, a leading player in the food and beverage industry, specializing in the manufacture of processed foods, was looking at leveraging SpendEdge’s cost analysis solutions. They wanted to identify the strengths and weaknesses in their transactional activities for functional business requirements or projects investments. The client was facing several issues related to their inefficient supply chain strategies. The company’s supply chain management executives recognized the tremendous benefits of implementing a cost analysis study. As such, they were looking at reducing the company’s risk profile by improving the efficiency of their overall supply chain operations.

To identify challenges in the supply chain functions, the cost analysis experts at SpendEdge carried out extensive research, comprising interviews and discussions with prominent stakeholders in the food and beverage industry. The experts also compiled information across a wide array of reliable sources such as trade shows, company presentations, industry forums.

Fundamental questions answered in this cost analysis study include:

Processed Foods

Why should you leverage cost model analysis?

Cost analysis is an essential way to identify and estimate the critical cost elements across a supply chain. Leveraging cost analysis enables organizations to determine the best negotiation levers, while simultaneously achieving the lowest cost mix.

The Result

SpendEdge’s cost analysis solution offered relevant insights that helped the processed foods manufacturing company to develop relevant strategies to enhance their business operations.

Our solution also enabled the client to identify, adapt, and implement the best practices that produced the best performance results in the processed foods sector. Moreover, the cost analysis solution enabled the client to achieve breakthrough improvements in their overall supply chain performance. Furthermore, it offered relevant insights to better understand the market scenario, supplier negotiation strategies, industry standards, and expectations.

Processed foods market trends:

  • The shift in global demand- Emerging markets such as Indonesia, India, Malaysia, and China are expected to drive the growth of the processed foods segment. This can be attributed to the increase in export and import of processed foods. Also, manufacturing and processing of foods will gradually shift to these markets, to be close to a growing customer base.
  • Increase in urbanization- It is estimated that by 2050, about two-thirds of the global population will be living in cities. This is expected to increase the demand for processed foods and meat protein in developing countries.
  • Growing demand for food- The growth in global population will directly affect the demand for processed foods. Also, to feed the global population, the agricultural production will also have to increase in developing regions.

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Cost Model Analysis: How it Helped a Leading Alternative Energy Company to Understand the Key Cost Elements Across Their Supply Chain

Overview of the alternative energy industry:

Alternative energy sources are renewable sources of energy. It can be defined as any non-traditional source that meets the energy needs of consumers. Also, they do not cause any undesirable changes to the environment. To meet the growing energy needs of the global population, several researchers around the globe are focusing on developing and discovering new alternative energy sources.

Traditional sources of energy include fossil fuels, such as oil and natural gas, whereas alternative energy sources are those that do not require the use of fossil fuels. Although most alternative energy sources are considered renewable, a few are non-renewable. Alternative energy sources used for generating electricity include solar energy, wind energy, and geothermal request free proposalenergy sources. However, the leading alternative energy source for transportation fuel is biofuels, with ethanol leading the market.

The different sources of alternative energy include:

  • Solar Energy
  • Hydroelectric Energy
  • Biomass Energy
  • Wind Energy
  • Tidal Power
  • Geothermal Energy

The Business Challenge and Journey

The client, a leading player in the energy industry, specializing in the alternative energy segment was looking at leveraging SpendEdge’s cost analysis solution. The client wanted a detailed outline of the potential risks and gains in the alternative energy industry.

The company’s supply chain management executives recognized the tremendous benefits of leveraging SpendEdge’s cost analysis solution. As such, they were developing the lowest possible cost mix using our cost analysis solution. Moreover, the client wanted to gain detailed insights and recommendations that will help them achieve the lowest possible cost mix.

To identify challenges in supply chain functions, the cost analysis experts at SpendEdge carried out extensive research comprising interviews and discussions with prominent stakeholders in the alternative energy industry. The experts also compiled information across a wide array of reliable sources such as trade shows, company presentations, industry forums.

Fundamental questions answered in this cost model analysis study include:

Alternative Energy

The Result

SpendEdge’s cost analysis solution offered relevant insights that helped the alternative energy industry client in identifying the essential cost elements across their supply chain. Moreover, with the help of our cost analysis solution the alternative energy firm was able to determine the ability of their current cost model and tools to meet stakeholder’s needs for calculating and comparing financial data across their business segments.

Why should you leverage cost analysis?

Cost analysis is a practical approach to evaluate the strengths and weaknesses related to organizational spend. It helps in determining the best approach to achieve maximum benefits while improving overall savings.

Alternative energy industry trends:

  • Growth of the electric vehicles marketThe electric vehicles market is growing rapidly across economies. The drop in battery costs and affordability are driving the widespread use of electric vehicles. This enables the development of new energy stability solutions, including wind-solar hybrid generation, grid management using utility scale batteries, and plausible alternative power storage options such as pumped hydro or a gas grid to create an adequate balancing mechanism.
  • Change in primary energy demandAn unprecedented drop in the cost of clean energy production has occurred in the last couple of years. Solar energy and wind power generation have undergone an annual average percentage drop in the cost of production.  Moreover, owing to the affordability, use cases of alternative energy have broadened. Alongside electricity production, it is also offering new and enhanced solutions for mobility and energy security worldwide.

    To know more about our cost analysis solution solutions for the alternative energy sector firms

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