WK #7 (Strat): Cost Structure Analysis |
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The Cost Structure analysis delineates how the Company spends money to
achieve the Company Goals. This analysis provides the basis for
understanding where efforts spent in reducing costs will provide the
best results. Although any effort made to reduce costs is
generally good (If the effort costs less than the cost reduction results), it is preferable to understand where the large cost
targets are located and to specifically attack these large cost areas.
In many cases the data for this analysis is not available directly from the Company accounting system. Note: "Most Traditional financial systems don’t provide a good way to measure and manage costs.”
GordianKnot provides the tools and the expertise to extract the costs
from the Company accounting system and categorize them in a significant
manner.
Cost Structure - Macro Analysis
General Cost Breakdown & Trends
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Operations as a % of Sales
- Materials
- Payroll & PBE
- Overhead
- SG&A as a % of Sales
Cost Breakdown by Process
Cost
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Structure to Operate Processes
- People, Supplies, Depreciation & maintenance, Space & Utilities,
- Utilization
Characterization – Core, Specialized, Fungible
Inventory
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Total inventory and Turns
- Slow moving/Obsolete inventory
- Sales Backlog “inventory value” as % of total
Cost Structure - Key Product / Service Analysis (Pareto Analysis)
Key Parent Items or Services
- Concentration & Frequency
- Top Value items - Key Items
- Growth Trends
- ASP & GM/Contribution Margin Trends
In-house Manufactured Items
- Concentration & Frequency
- Top Value Items
- Cost Breakdown and trends
- Process Fungibility
Purchased Materials & Supplies
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Concentration & Frequency
- Top Value Items
- Pricing Trends
- Unit Cost & Lead Time
- Specification Fungibility
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