Customers love companies hate product variety … complexity … But..

Your productportfolio grows … More products… More parts… But... Not more profits!? Even more sales …

How come? The typical cost breakdown For manufactured products Looks like this… Note:purchased items ≠ material! Purchased items Labor Overhead

But according to lean principles only a small part of these costs represent Not only for labor… added value Value added Non-Value added

But also for (the cost of) overhead … Value added Non-Value added Purchased items Labor Overhead

the non added value within the overhead increases when the complexity … of the production system grows Purchased items Labor Overhead Value added Non-Value added

And an indicator the number of articles necessary to manufacture your portfolio for this compexity is …

So instead of allocating Like peanut butter … to your products overhead costs

You better take into account the This will make the ‘manufacturing cost price’… ” uniqueness” of the articles used

Show larger –and more realistic - differences than in the conventional system Enabling you to make decisions… to improve your product portfolio €

So you do not want to use only an elaborate Activity Based Costing system… But you also do not want … the conventional costing system… How should you do it ?

Analyze your Profit&Loss account Define to what extent the metric is a cost driver for each cost pool … and use this to establish ‘ article number’ the (overhead) cost of an article

This parameter can be used to give a more realistic overhead allocation for products featuring more ‘uniqueness’ € €

then remember: If you don’t feel the pain , Don’t want to change? So… there won’t be any gain

Why not try to apply it … And raise your in your own specific situation … long term profitability ?

If you need some more support … please contact: Verbeek Business & Innovation www.verbeekbi.nl [email_address]