Surely you recognize one of the following situations:
- There is pressure from shareholders to increase the profitability of your organization.
- You would like to free up money to make important investments.
- Benchmarks show that your profitability – and therefore competitiveness – is lagging behind competitors.
- After that successful acquisition it is necessary to deliver on the promised synergies.
Your gut feeling tells you that there must be opportunities to increase the margin on your products or services, and you are looking for ways to identify those opportunities. In fact, you would like to have more insight in and a handle on these margins.
Integral Margin Management
Integral margin management – ensuring a good balance between the product value perceived by the customer and the costs incurred to deliver this value throughout all stages of the product lifecycle is indispensable when it comes to effective business operations. This is true for any organization, but the effort required to stay in control varies by industry sector. The manufacturing industry (high tech, consumer products, automotive) tops the list when it comes to the complexity of cost management for good reason:
It often involves complex supply chains consisting of multiple production locations, multi-tier supplier landscapes and extensive logistics chains. Driven by technological developments and tough competition, product life cycles have dramatically shortened in recent decades. This has led to increased pressure on Sales &Marketing, R&D, Procurement and Production to develop and launch new products. On top of this, globalization has sparked global competition, forcing organizations to gain insight into the development of cost patterns for labor, materials and logistics in various parts of the world.
Cost managers are responsible for raising important questions like:
- Do our products meet customer expectations? Have we added functions that involve cost but do not add value from the customer’s perspective?
- Is the product optimally designed in terms of cost?
- How could we best design, organize and manage production processes to minimize costs?
- What should we take care of in-house and what should be outsourced? What would be a fair price for that?
- Do we have the right supplier portfolio and contract conditions?
- How do we develop reliable and sustainable cost models and where can we find data to feed into these models?
The key underlying question here is: are there opportunities to identify and tap into hidden margin?
Here is where Tarlunt Consulting Group comes in to help you