WHAT IS COST ANALYSIS?
Cost analysis is the practice of managing the costs involved in a production process. This includes tasks such as cost estimation, design-to-cost, cost control, budget monitoring, and investment estimation.
Cost analysis arises from the need to monitor and control company expenses and focus management’s attention on achieving goals.
Initially, cost analysis was developed to define certain costs in order to obtain a value that could provide the basis for setting a sale price.
Subsequently, cost analysis has taken on a more specific role, aimed at determining the costs of the various functional areas of a company in order to calculate the cost of a product.
The increasing importance of cost control, which now represents a fundamental input for measuring the efficiency and competitiveness of a company compared to other competitors, has made cost analysis a fundamental activity for every company, regardless of its size and sector.
Cost Analysis Goals
Cost analysis makes possible to achieve the goals set by the company through:
- Precise and timely cost estimation;
- Evaluation of the most convenient solution (material-process) with the same technical characteristics;
- Determining the cost-effectiveness and possible actuation of a product (Initiative);
- Analysis related to cost reduction and value optimization activities;
- Taking into account comparable companies decisions that brought to their economic success;
- Improving supply chain process;
- Supporting the purchasing department during negotiations with suppliers;
- Benchmarking activities: competitor analysis, cost and performance comparisons.
WHY COST ANALYSIS?
The word “cost” can have many different interpretations. Nowadays, the purely financial explanation is often the prevalent one which leads in many cases to approximate evaluation errors with strong repercussions on the final product. This occurs both in terms of selling price and in terms of perceived quality. Knowing how to evaluate a cost with all the inevitable consequences that this involves, it requires skills that are not always present within companies. Sometimes these competences are only present for parts of the process. MeC is an extremely specialized reality that only deals with cost analysis where professionals complement each other in an optimal way. Professionals who, in turn, are specialized in the individual stages of cost analysis. They are therefore able to follow every single project phase even more efficiently.