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|