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! Pu...
But according to   lean  principles only a  small  part of these costs represent Not only for  labor… added value Value ad...
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 i...
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   ...
So you do not want to use  only an   elaborate  Activity Based Costing system… But you also do not want  … the   conventio...
Analyze your   Profit&Loss  account Define to what  extent  the metric is a  cost driver  for each  cost pool … and use th...
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]
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product variety YES, complexity NO

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Customer driven manufacturing industries often increase their product variety to raise sales. An unwanted effect

however is the resulting increase of the costs of complexity within the organisation and the supply chain, and in

the end profitability suffers. A method to take into account these hidden costs of complexity is presented, giving

the opportunity to improve the productportfolio

Published in: Business, Health & Medicine
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product variety YES, complexity NO

  1. 1. Customers love companies hate product variety … complexity … But..
  2. 2. Your productportfolio grows … More products… More parts… But... Not more profits!? Even more sales …
  3. 3. How come? The typical cost breakdown For manufactured products Looks like this… Note:purchased items ≠ material! Purchased items Labor Overhead
  4. 4. But according to lean principles only a small part of these costs represent Not only for labor… added value Value added Non-Value added
  5. 5. But also for (the cost of) overhead … Value added Non-Value added Purchased items Labor Overhead
  6. 6. 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
  7. 7. And an indicator the number of articles necessary to manufacture your portfolio for this compexity is …
  8. 8. So instead of allocating Like peanut butter … to your products overhead costs
  9. 9. You better take into account the This will make the ‘manufacturing cost price’… ” uniqueness” of the articles used
  10. 10. Show larger –and more realistic - differences than in the conventional system Enabling you to make decisions… to improve your product portfolio €
  11. 11. 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 ?
  12. 12. 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
  13. 13. This parameter can be used to give a more realistic overhead allocation for products featuring more ‘uniqueness’ € €
  14. 14. then remember: If you don’t feel the pain , Don’t want to change? So… there won’t be any gain
  15. 15. Why not try to apply it … And raise your in your own specific situation … long term profitability ?
  16. 16. If you need some more support … please contact: Verbeek Business & Innovation www.verbeekbi.nl [email_address]

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