Better Business Decisions Using Cost Modeling

Book description

: Information is power in supply chain operations, negotiations, continuous improvement programs, and process improvement, and indeed in all aspects of managing an operation. Accurate and timely information can result in better decisions that translate into improvement of bottom line results. The development and effective use of cost modeling as a method to understand the cost of products, services, and processes can help drive improvements in the quality and timeliness of decision making. In the supply chain community an understanding of the actual cost structures of products and services, whether with new or non-partner suppliers, can facilitate fact-based discussions which are more likely to result in agreements that are competitively priced and with fair margins. Further, accurate cost models which are cooperatively developed between supply chain partners can form the basis for joint efforts to reduce non-value-added costs and provide additional focus towards operational improvement. While many organizations feel confident they have an understanding of the cost structure for products and services produced internally, cost modeling often uncovers areas where significant cost improvement can be obtained. Cost of quality is a particular type of internal cost model that analyzes the true costs associated with the production of less than perfect products and services. The development of a cost of quality model can provide insight into how products or services of higher quality can be produced at lower cost. This book provides the business student or professional a concise guide to the creation and effective use of both internal and external cost models. Development of internal cost models is discussed with illustrations showing how they can be deployed to assist in new product development, pricing decisions, make-or-buy decisions and the identification of opportunities for internal process improvement projects. The creation and use of external cost models are discussed providing insight into how their use can drive collaborative improvement efforts among supply chain partners, better prepare for price negotiations, and keep negotiations focused on facts rather than emotions--all while allowing for future discussions with preferred suppliers to focus on more strategic and operational improvement initiatives, and less on pricing. A number of detailed cost model examples are provided to educate on both how cost models are constructed, and to demonstrate how they have been effectively deployed

Table of contents

  1. Better Business Decisions Using Cost Modeling: For Procurement, Operations, and Supply Chain Professionals
    1. Testimonials
    2. Copyright
    3. Abstract
    4. Keywords
    5. Illustrations
      1. Tables
      2. Figures
      3. Examples
    6. Acknowledgments
    7. Abbreviations and Acronyms
    8. CHAPTER 1: Introduction
      1. Human/Political Issues
      2. The General Cost Model: What Should the Cost of a Specific Product or Service Be?
      3. Categories and Uses of Cost Models
    9. CHAPTER 2: Constructing Cost Models
      1. Foundational Principles
      2. Conceptual Design
      3. Architecture and Construction
      4. Data Sources
    10. CHAPTER 3: Internal Cost Models
      1. Cost Feasibility Analysis for New Products and Services
      2. Learning Curve Cost Model
      3. Internal Cost Modeling as an Input to the Pricing Decision
      4. Internal Cost Modeling in Cost Reduction/Continuous Improvement Programs
      5. Internal Cost Modeling to Support Projects to Increase Efficiency or Reduce Costs
      6. Integration of Multiple Models
    11. CHAPTER 4: Other Internal Cost Models
      1. Breakeven Models
      2. Make-or-Buy Decision Making
      3. Process Selection: Crossover Chart
      4. Cost-of-Quality Models (1/2)
      5. Cost-of-Quality Models (2/2)
      6. Integration of Multiple Models
    12. CHAPTER 5: External Cost Models for Procured Materials
      1. Procured Material Cost Models (1/4)
      2. Procured Material Cost Models (2/4)
      3. Procured Material Cost Models (3/4)
      4. Procured Material Cost Models (4/4)
      5. Conclusion
    13. CHAPTER 6: External Cost Models for Procured Services
      1. Procured Service Cost Models
      2. Greater Volume Equals Greater Leverage
      3. Conclusion
    14. CHAPTER 7: Total Cost of Ownership Models
      1. Acquisition Costs
      2. Installation/Implementation Costs
      3. Operating Costs
      4. Maintenance Costs
      5. Opportunity Costs
      6. Disposal and Salvage Costs
      7. Conclusion
    15. APPENDIX: Data Sources for Cost Modeling
    16. Notes
      1. Chapter 1
      2. Chapter 2
      3. Chapter 3
      4. Chapter 4
      5. Chapter 5
      6. Chapter 6
    17. References
    18. Index (1/2)
    19. Index (2/2)

Product information

  • Title: Better Business Decisions Using Cost Modeling
  • Author(s): Victor E. Sower
  • Release date: September 2011
  • Publisher(s): Business Expert Press
  • ISBN: 9781606492673