Identify where to focus resources for improving your profitability

Often, process industries can not entirely accommodate the selling price of their products to the actual production costs – either because of tough competition, or due to set market prices. Therefore, accurate costing models are an absolute necessity when hidden costs, such as quality deficiency costs or capacity costs, need to be recognised and taken into consideration.

For example, cost modelling is a powerful tool when deciding on where to focus your company’s improvement activities. You can, for example, compare the actual quality deficiency cost of a product or product line with the investment in new machinery that reduces the amount of faulty products, making it easier to motivate such an expense. Or to avoid unprofitable investments.

For certain industries, like Food & Beverages or Chemicals, where inventory costs are a large factor, a profitability analysis can, for example, make indirect costs transparent at a product- and customer basis. This, for example, makes it possible to identify which customers consume products that demand higher warehousing costs, and to understand why these products, in their turn, drive up inventory costs.

Astrada has a long history of performing advanced cost analysis within the process industry. By combining such an analysis with an implementation of Astrada5, your organisation will gain an understanding of how your indirect resources are consumed and how this affects bottom line profitability by product, by customer, and by sales channel. You will also have an excellent tool to monitor cost and profitability, and to perform accurate pre-costing.