Many industrial companies utilize a structured method for product design. Continuous estimation and tracking of the product cost is very important throughout the product development lifecycle. As the product design matures, the cost structure often shifts significantly. There are various reasons for this shift, including:
The Consumer Packaged Goods (CPG) industry is facing huge challenges with volatile commodity prices. Customers are highly sensitive to product pricing. Customer behavior and needs have considerably changed, due to a preference for healthier foods, high sustainability, transparency and decreasing brand loyalty. The industry is also experiencing limited pricing power; due to retailer consolidation. Amazon’s purchase of Whole Foods, along with Walmart’s purchase of Jet.com, have broadened their horizons, by operating retail stores and ecommerce respectively. Rising commodity prices, customer price sensitivity, changing customer behavior, and retail consolidations have resulted in lower profit margins.
| 2010 | 2014 | 2018 AND BEYOND | |
|---|---|---|---|
| Methods | Low Cost Sourcing | Total Cost of Ownership | Dynamic Sourcing |
| Drivers | Material Cost Reduction | Landed Cost | Quicker Response to Market |
| Benefits | Instant Cost Reduction | E2E Reduction | Agile: Adapt to Change |
Independent of the condition of the economy, at any point, there is an increasing need within organizations, in every industry, to have more transparency across the overall supply chain costs and the factors that influence it. Activity Based Management (ABM) is a technique used to provide this visibility, and thereby help improve strategic and operational decisions in the organization. ABM involves identifying activities that a business performs, and carrying out a value chain analysis, using Activity Based Costing (ABC).
Blockchain is a decentralized digital archive that records all transactions across a peer to peer network. Blockchain technology allows for participants to confirm transactions without the need for a central authorization. Whenever a user requests a transaction in a blockchain environment, it is broadcasted to a peer to peer network of nodes. These nodes are responsible for validating the transactions. Once validated, these transactions are added to the existing blockchain making them permanent and unchangeable, making the transaction complete. There are several advantages to this technology.
