Enterprise-wide product cost management: seven steps to success


    Companies that thrive in international competition choose a proactive, forward-thinking approach to costing. The reason is simple: decisions based on static analyses no longer suffice in a digitized economy that increasingly relies on connectivity, real-time data and automation. The advancing digitization of products and manufacturing processes will inevitably force manufacturing companies to develop strategies for enterprise-wide product cost management.

    We have used our expertise to put together seven key steps in implementing successful product cost management.

    Step 1: Use standardized calcualtion methods across the enterprise
    The first step toward successful product cost management is standardizing costing throughout the organization. The objective is to create a common understanding of cost management based on standardized costing methods. A unified reporting methodology and a standardized costing system are essential to these efforts. In this way, businesses obtain reliable data and calculation models and minimize errors.

    Step 2: Access central database including all of the costing and quoting history 
    A forward-thinking approach to costing requires businesses to integrate data in a single system that consolidates all of the relevant cost data from the company and visualizes the costing and quoting history. The company can store all quote varia-tions in one data set, making it easy to precisely track earlier versions and historical price calculations.

    Step 3: Automate enterprise-wide costing with identical data
    Quotation calculations, for example, are the product of interdisciplinary collaboration. They are more precise when every department, from development to sales, works simultaneously with identical data. Central processing promotes data integri-ty. Real-time availability ensures enterprise-wide use of current data and automatic adjustment of calculation overviews.

    Step 4: Maintain transparency throughout the entire quoting process
    The path from quoting to closing is often paved with countless change requests and customer interactions. Analysis of quoting processes considering all costs over an extended time period creates transparency. This forms a solid basis for reasoning in discussions and negotiations with customers so that cost transparency reinforces the negotiation position of a company too.

    Step 5: Understand how customers analyze and evaluate quotes 
    Companies develop successful quotation presentations because they know how customers analyze product costs and incorporate this insight into the company’s own quotation calculation. A shadow calculation is used to reverse engineer the customer’s logic. The insight gleaned from these efforts serves as a guideline for their own quotation process.

    Step 6: Prepare user-friendly calculations
    Data is prepared in an easy-to-access, user-friendly format. This enables businesses to effortlessly share cost calculations within the company and make them available to customers as part of regular quotation communications. Companies’ work is service-centric, because they are able to export cost calculations to a selected customer format.

    Step 7: Eliminate decentralized distributed calculation overviews
    Successful businesses forgo calculation overviews that require manual maintenance and decentralized, virtually uncontrollable distribution and incorrect, obsolete information. They also reduce the time needed to coordinate such a broad range of information. Enterprise-wide product cost management leads to more security and precision in the costing process.

    Learn more in our webinar on demand "7 ways to win the costing game" how to achieve a company-wide product cost management.

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