Executive Briefings

Cost Modeling Can Dramatically Reduce Procurement Expense

Projected cost modeling can help supply management organizations reduce procurement costs and generate information that could improve cost performance throughout the supply chain. Supply management professionals are aware that cost is often an important factor in making an informed business decision. And cost models can turn cost data into cost information, which can help organizations make better business decisions.

Cost modeling is the analysis of resource data "” direct labor; direct material; indirect costs; selling, general and administrative costs; R&D costs; and profit "” to understand the projected or true cost of products and services produced or purchased by an organization.

There are many types of cost models, both external and internal. External cost models include industry-specific projected cost models for both products and services, and the total cost of ownership model. Internal cost models include break-even cost models, make-or-buy cost models, internal projected cost models, crossover chart models and cost-of-quality models.

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Keywords supply chain management IT, value chain IT, supply chain solutions, cost analytics

Cost modeling is the analysis of resource data "” direct labor; direct material; indirect costs; selling, general and administrative costs; R&D costs; and profit "” to understand the projected or true cost of products and services produced or purchased by an organization.

There are many types of cost models, both external and internal. External cost models include industry-specific projected cost models for both products and services, and the total cost of ownership model. Internal cost models include break-even cost models, make-or-buy cost models, internal projected cost models, crossover chart models and cost-of-quality models.

Read Full Article


Keywords supply chain management IT, value chain IT, supply chain solutions, cost analytics