How to Win, Perform, and Profit
This is a guest blog by Dan Kennedy, director of services at Galorath, responsible for helping Aerospace and Aeronautical sector companies get to a more effective, efficient and competitive position.
Winning, Performing, and Profiting
“If your company is not being challenged in at least one of these areas, then you are either extraordinarily lucky, or in for a huge surprise.”
Our upcoming webinar will show you how the SEER approach can help you streamline Supply Chain Management and reveal Should-Cost insights that can boost your profit.
On April 26, I will be hosting the webinar: “Winning, Performing, and Profiting.” In this webinar, I’ll be focusing on the prevailing and emerging obstacles that I’ve observed across industries while examining the root causes. With over 30 years of experience in manufacturing, I bring solutions to the table, along with a healthy dose of insight into resolutions and hope.
If you’re looking to learn how to make the most of supply chain management, here’s an overview of what we’ll focus on…
In a recent industry article, the author speculated that OEMs, (especially those in the aerospace sector), source a significant majority of their material from suppliers; maybe as much as 70%.
This illustrates the importance of understanding the “Should Cost” of the materials that you are paying for that ultimately wind up in your products. Savings made for what you pay for your “Materials” translate directly to your company’s competitiveness and profit line.
The labor component is of similar and sometimes greater importance and can also often have a monumental effect on the bottom line. Decision makers need to be assured that the hours that are spent working on the product and the labor rates applied are competitive.
Unless a company has a firm grasp of their cost elements in the marketplace, they are at risk of not being competitive, not winning new work or not being sufficiently profitable to survive in today’s markets. Many companies work with around a 1/3 material, 2/3 labor mix in their products along with a 10% profit. A 10% savings in purchased materials translates to a 3% or more reduction in factory cost. This can either turn into higher win ratio or higher profit for the company (30% in this case).
Costing techniques are varied and include the use of both proprietary and non-proprietary methods. While most organizations still retain a 'traditional' small cost estimating department that uses experienced individuals backed by large amounts of owned data, there is little data that reflects industry norms and standards. This contributes to fragile decision making and potentially higher risk.
A well-managed “Should Costing” approach is clearly an advantage on the road to success and forms the foundation of a consistent and defensible cost management process, that in turn leads to an increase in profitability and the best stakeholder returns. We have seen our customers succeed because they speak intelligently from a position of strength, to negotiate and plan based on credible information and to avoid risk. We provide a spectrum of routes toward a better alternative, where winning is more frequent, work is carried out effectively and profits are protected and increased.
Best practice eludes to the fact that this is the right path, common sense dictates that it is.