LONDON--(BUSINESS WIRE)--Various business entities as well as organizations have been adopting the concept of cost analysis for achieving cost effectiveness in their operations. A well-defined cost analysis model can help a firm to define the right pricing strategy, leading to prudent decision making.
Procurement market intelligence firm SpendEdge recently examined the advantages and challenges of cost analysis in its blog titled ‘The Present and Future of Should Cost Analysis’.
SpendEdge observes that “The application of cost analysis can be found in various industries such as the manufacturing industry, automotive industry, and the retail and consumer packaged goods (CPG) industry. It helps management to gain knowledge about pricing strategies and its effect on their supply chain, helping build strong supplier relationship management and drive profitability.”
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“However, organizations tend to avoid adopting cost modelling techniques because of their time consuming and complex nature. Some business entities have been facing problems in understanding the newly designed cost analysis, as they have become accustomed to traditional product costing methods such as cost structure analysis, activity based costing and strategic sourcing,” added SpendEdge.
There are a wide number of disadvantages associated with traditional cost analysis methods. These methods are one-dimensional, rigid, costly and difficult to scale across functions or cost elements, and they do not help in building a strong supplier relationship. The associated disadvantages forbid the organizations from taking a 360-degree view of the supply market competitive landscape and trends in the industry.
The should cost analysis model will enable organizations to negotiate well with the suppliers, thereby creating a win-win situation for the buyer as well as supplier. It facilitates collaborative development, improving product quality by leveraging supplier insights, mitigating potential supply chain risks and drives profitability. As against the traditional costing methods in use, the should cost model will help organizations to determine the setup cost to ascertain optimum order quantitates and inventory levels.
Read more: https://www.spendedge.com/blogs/present-future-cost-analysis
More information on the latest procurement trends and how leading organizations are benefiting from procurement intelligence can be found using resources from SpendEdge. These resources are compiled from SpendEdge’s team of 500+ procurement solutions experts.
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