If you have been following the world situation, you know that many countries have been relying on “low cost countries” to supply critical equipment, supplies and pharmaceutical. This has all been based on LOW COST country beliefs. Now, many countries are looking to localize these essential supplies to limit their dependency upon others. This is where Cost Management comes in.
Each company has their own period of time and way to recover the investment they do in production assets, i.e. production equipment. But one thing is for sure, the companies we all know are not Non-Profit Organizations and they invest in order to make money. Which is just fine, we wouldn’t be here talking today otherwise.
The best way to utilize a Cost Model in a negotiation is to not even hint that you have a cost model. Rarely would I suggest that it is “Open Book” on both sides. I’m sure this goes directly against what a lot of you have been taught and are doing. Afterall, you are the customer and the old adage “The customer is always right” still works today. I realize this is against a lot of the current thought, but this is a negotiation and a negotiation is a battle. You should want to win the battle. Now to be honest, I’ve taken my share of negotiation training from the large training houses who teach it has to be a WIN WIN to be successful. During these training classes, no one wanted to go against me because I wanted to win.
In my previous blog, “It’s all Rocket Science, at least to someone it is”, I discussed that everything is created equal. By that I meant that if you can build it, a good cost engineer can model it. However, you will continue to run into skeptics that will say “this is medical, it’s not automotive” or “where did you capture the cost of quality?”. Or even more often stated, “we hold tighter tolerances and we all know that drives costs.” Tighter tolerance doesn’t always drive piece costs. In injection molding, it will be mostly in the tool cost (hopefully paid upfront and not in the piece cost). In machining, it will drive more cutting time by causing addition or slower passes. My attempt here will be to lay these myths to rest. (If you disagree, please feel free to comment to this blog). My friends that are Quality Engineers are going to be upset.
Everything must go through a process. If you can define the process, you can capture the costs. One of my favorite bosses of all times used to say, “We can calculate the cost of making a ham sandwich, if we can define how to make it.” He was correct.
With the virus and its impact in mind, the Society of Cost Engineers has decided wave the 2020 membership fee for new members. That is correct, no membership fee for 2020. All you need to do is to visit the Membership Page and register FOR FREE. The expectation is that the world will be in a much better place in 2021 and we will be able to go back to the standard pricing.