Introduction and challenges
Controlling production costs in terms of defining the price positioning for its products and optimizing industrial performance, is a key lever to improve operating income.
The performance management of cost of goods sold (COGS) mobilizes stakeholders from many departments, each with specific management cultures. The operations controller and the operations manager play key roles in aligning these various stakeholders with a common language, in focusing each on their area of responsibility and in facilitating management discussions.
COGS modeling and analysis need to be adjusted to the challenges the enterprise is facing. The objective is to be pragmatic and enable efficient management of performance drivers while avoiding being intrusive and imposing heavy reporting requirements on operational processes.
In many cases, the human dimension of transformation is insufficiently prepared. Therefore, it is important to analyze the change impact for each population and to build an implementation plan that takes this analysis into account. In many cases, a progressive deployment can be an effective approach to guarantee collective buy-in.
How we can help
Argon & Co mobilizes manufacturing performance experts and finance function experts to support its clients in the implementation of product costing projects. Depending on the projects and maturity of our clients, we work on all or some of the following subjects:
Industrial cost modeling
- Analyze value chains, breakdown of costs and identify key performance factors (including correlation analyses using Big Data)
- Model the management structure (identifying profit centers and cost centers and associated management rules – including mark-up rules and indirect center allocation rules)
- Review the structure of operational monitoring (product range, terminology, monitoring granularity, work units, etc.)
- Analyze past production orders to propose a recalibration of production standards
Definition of the performance management system
- Review governance, clarify roles, responsibilities and rituals:
- for the initial construction of cost prices (product development context)
- for industrial performance management (operational monitoring context)
- Build the pricing and/or margin sheets used in product development
- Structure the analyses and build the dashboards to facilitate operational and financial performance monitoring
- Review the structure of the cost-based income statement
- Analyze the change impact on different populations
- Construct the implementation plan by distinguishing between:
- Short-term actions (not requiring tool development and with high acceptability)
- Long-term actions
- Frame IT development needs and write functional specifications
- Support the implementation of performance management (organization and participation in the first committees in “pilot” mode)