As companies grow from small to midsize, they inevitably arrive at a point where systematic cost analysis — a regular, automated process of evaluating all costs — is critical to their survival and continued growth. Small companies with just a few services or products can check manually to make sure they understand their costs well enough to price them and turn a profit. When material and labor costs are stable and predictable (as they were for most of the last decade), pricing and costing isn’t a huge challenge.
Midsize Companies Need a Systematic Approach to Cost Analysis
Lessons from one organization’s digital transformation.
July 30, 2021
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Summary.
As companies grow from small to midsize, manual checks will no longer suffice to track a broader array of costs back to individual products or services. Growing companies then require technologies such as ERP (enterprise resource planning), MRP (material requirements planning), and project management software to keep them on the right (and profitable) track by examining what creates value and at what cost, tracing the flow of labor and materials through the value-generation process, and minimizing the costs of excess assets like inventory or underutilized human assets. This is a key turning point in the digital transformation of midsize firms. Here’s how one of them pursued its digital transformation and implemented upgraded technology successfully.