Customers love
product
variety…
But..
companies hate
complexity…
WHY
WHAT
HOW
NOW
Your productportfolio
grows…
More products…
More parts…
Even more
sales…
But...
Not more profits!?
WHY
WHAT
HOW
NOW
How come?
The typical
cost breakdown
For manufactured products
Overhead
Looks like this…
Labor
Purchased
items
Note:purchased items ≠ material!
WHY
WHAT
HOW
NOW
But according to
lean principles
only a small part of these costs represent
Value added
added value
Non-Value
added
Not only for labor…
WHY
WHAT
HOW
NOW
But also for (the cost of)
overhead…
Value added
Overhead
Non-Value
added
Labor
Purchased
items
WHY
WHAT
HOW
NOW
non added value within the overhead increases
when the complexity
the
Value added
Overhead
Non-Value
added
Labor
Purchased
items
…of the production system grows
WHY
WHAT
HOW
NOW
indicator
And an
for this compexity is…
the
number of articles
necessary to manufacture your portfolio
WHY
WHAT
HOW
NOW
So instead of allocating
overhead costs
to your products
Like
WHY
peanut butter…
WHAT
HOW
NOW
You better take into account the
”uniqueness”
of the articles used
This will make the ‘manufacturing cost price’…
WHY
WHAT
HOW
NOW
Show larger –and more
realistic- differences
than in the conventional system
€
Enabling you to make decisions…
to
improve your product portfolio
WHY
WHAT
HOW
NOW
So you do not want to use only
the
conventional costing system…
But you also do not want …
an elaborate Activity Based Costing system…
How should you do it?
WHY
WHAT
HOW
NOW
Analyze your
Profit&Loss account
Define to what extent the metric
‘article number’
is a cost driver for each cost pool …
and use this to establish
the (overhead)
WHY
cost of an article
WHAT
HOW
NOW
This parameter can be used to give
a
more realistic overhead allocation
for products featuring more
‘uniqueness’
€
€
WHY
WHAT
HOW
NOW
Don’t want to change?
then remember:
pain,
there won’t be any gain
If you don’t feel the
So…
WHY
WHAT
HOW
NOW
Why not try to
apply it …
in your own specific situation…
And
raise your
long term
WHY
profitability?
WHAT
HOW
NOW
If you need some more support …
please contact:
Verbeek Business & Innovation
www.verbeekbi.nl
[email protected]
WHY
WHAT
HOW
NOW