Automation.com Reveals 1% COGS reduction Increases Net Income by 16%
Concord, MA -- (SBWIRE) -- 05/01/2006 -- On the income statement of most discrete manufacturing firms, cost of goods sold, COGS, is typically in the range of 70-95% of revenue. For many of those same companies, net income is typically in the range of 3-8% of revenue. Looking at a representative company who’s COGS is 80% of revenue and whose net income is 5% of revenue; if you can reduce COGS by 1% (to 79.2% of revenue), that savings goes directly to the bottom line, increasing net income to 5.8% of revenue thus increasing net income by 16%.
Most discrete manufacturers believe they can achieve a modest 1% savings in their COGS. According to Frank Azzolino, President and CEO of aPriori (www.apriori.com), which produces cost management software, “Giving our customers accurate, predictive, real-time product cost estimates along with their understanding of the leveraged effect that reducing COGS has on net income (and the profit opportunity that this represents) is one of our primary value drivers.”
According to contributing editor, Thomas R. Cutler, in the current issue of Automation.com, “Cost information in most organizations is fragmented throughout the enterprise. Critical pieces of cost information are spread across independent silos within an organization in different functions like engineering, planning, manufacturing, sourcing, and finance. This situation typically results in estimates that do not include all relevant information required to make accurate and predictive product cost assessments.”
Based in Concord, MA, aPriori is the technology leader providing innovative cost management solutions to the discrete manufacturing industry. aPriori’s Cost Management Software Platform enables manufacturers to better understand product cost decisions early and throughout the product lifecycle. aPriori’s Cost Management Platform empowers manufacturers to lower cost-of-goods sold (COGS), provides real-time visibility to “cost-critical” decision information, and builds critical cost knowledge to go on the business “offensive.” aPriori’s patent-protected cost management platform allows companies to assess, control, and reduce cost of goods sold by whole percentages. The aPriori Platform enables “Cost Knowledge Before it Matters.”
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