Cost Planning ⎯ Finding the Lost Horizon

Cost_Planning_Blog_Cloud_ERPCost planning ⎯ finding the benchmark standard cost for your products or service ⎯ is much like searching for the magical world of Shangri-La in the movie Lost Horizon. You know your destination. But you don’t know exactly where it is. To find it, you must get up in the air and keep adjusting your flight path as you scan the horizon. But your technology doesn’t allow that. Instead, you have to hop and hope: hop from landing point to landing point, and hope each time the path you select will get you where you want to go.

Cost planning is crucial to maximizing profits and staying competitive. And it’s always somewhere on the horizon; you must do it:

  • Periodically for established products or product lines
  • When introducing a new product or service
  • Each time the company makes engineering changes on a product
  • To manage exceptions (for example, if an item’s current cost expired and was never replaced with a new cost)

But cost planning is complex, laborious, and time-consuming. People must collaborate across departments ⎯ manufacturing, sourcing, cost accounting ⎯ to sift through terabytes of data about raw materials, assembly, market demand, competitors, and more to decide what to charge, and for how long, for each product or service. Miscalculations are costly ⎯ money left on the table if the price is too low, market rejection if the price is too high.

And changing direction once you’ve set a standard cost and price is painful. You must gauge the marketplace reaction, then repeat the whole process to identify and implement a revised price. It’s a fire drill anytime a company must re-calculate due to an error, or respond to a sudden change in the marketplace, or counter a competitor’s surprise move. And what if the revised price also misses the mark?

Kenandy’s native cloud architecture, built on the Salesforce Platform, enables you to plan your costs more swiftly and efficiently and, critically, pivot as circumstances demand. Instead of relying on dueling spreadsheets and time-consuming PowerPoint presentations, your cost accountants and manufacturing and sourcing departments can use powerful social and collaborative tools, such as Chatter, to share files, exchange insights, and iterate in real-time.

You can fine tune your cost planning throughout the year.  Imagine being able to plan on a continuous basis, without waiting for one period to complete before you can plan for another. Imagine having multiple strategies ⎯ concurrent (based on discrete market conditions) or consecutive (seasonal strategies). As products are enhanced, you can create a new planning status and perform a cost rollup on the new item specs. New costs go into effect automatically, as of the start date of the product revision, so revised costs never fall through the cracks.

In Kenandy, you’re not glued to a cost structure or strategy once it’s done. You can iterate your cost models and conduct on-the-fly and “what-if” modeling to make better, faster pricing decisions. Model multiple costs for multiple future time periods and perform month-to-month rolling forecasts. Compare the cost of building a product in-house with the cost of contract manufacturing.

With Kenandy, not only can you clearly see your pricing horizons ⎯ you can quickly and easily adjust your flight plans to account for anything new on the horizon.

Shangri-La no longer seems so unattainable.

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