Cost behavior and cost driver activities for flexible budgeting

Worksheets Characteristics of Flexible Budget A budget may be described as a quantitative expression of a company plan for any specified long term period, usually per year. It is merely a financial forecast for a potential period.

Cost behavior and cost driver activities for flexible budgeting

Since then, capacity pressures have eased, fuel prices have fallen, and the weather has generally improved. The environment for supply chains, however, has not.

Disruption has come to grocery and, with it, major changes for CPG companies. Competition among retailers is at a fever pitch, reigniting cost pressures and challenging manufacturers to dig deeper for more efficiency in the supply chain.

For CPG companies, scale no longer confers the same supply chain advantage it once did.

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With more participants and more routes to market, moving goods from plant to shelf involves more hurdles and more complexity. How are outbound CPG supply chains faring in this tumultuous period? This report, one of a series, sheds light on that question. The study is based on four components: The study was conducted in and is based on and data.

Participants included manufacturers of food, household, and beauty products with ambient and temperature-controlled both refrigerated and frozen supply chains. For multinational participants, we confined our study to their US operations. BCG analyzed and interpreted the study findings and is wholly responsible for all analyses, conclusions, and recommendations.

To ensure data validity and quality, we cleaned the data extensively, followed up with individuals, and compared outliers with peers and with historical data. We also segregated findings by product category and temperature mode. For the first time sinceCPG companies have improved their service levels, but not without incurring more cost.

For some of our study participants, the improvements came automatically—primarily through lower fuel costs and milder winters. For others, the gains were the result of deliberate efforts. Overall, the performance of manufacturers of ambient products differed substantially from that of manufacturers of temperature-controlled products: Inas those problems eased, performance improved for most CPG companies.

Cost behavior and cost driver activities for flexible budgeting

As a result, no single issue emerged from the survey as an overwhelming concern. Forty-seven percent also ranked customer service among their top three concerns—not surprising, given the growing challenge of meeting so many different customer requirements.

Managing the Cost—Service Tradeoff Achieving high service levels while keeping costs low is a perpetual challenge, yet the need to do so is only growing. Retailers are feeling the effects of tectonic shifts in the industry—notably, the rise of e-commerce.

To stay competitive, they will continue to press for better prices and better service levels from their CPG providers.

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And that burden may well grow. Some companies have managed the cost—service tradeoff more deftly than others. Among respondents who also participated in the survey, the median on-time case fill factor was Cost per case includes replenishment freight, distribution center and warehouse operations, customer freight, and overhead.

Only three companies succeeded in improving service and reducing costs. There are a few reasons for this result.

When we say affordable, we mean it.

One is that temperature-controlled carriers tend to be smaller companies, for which new regulatory requirements such as the mandate for electronic logging devices will be more burdensome. Perhaps a more important reason is the lower capacity in the temperature-controlled market, which has given carriers the opportunity to raise historically anemic rates.

So the tight capacity has enabled us to invest in yield management tools. Freight costs thus had a commensurate impact on total logistics costs, which include distribution center and warehouse operations, customer freight, and overhead and management.

For temperature-controlled goods, logistics costs per case rose from to Service Rebounded… Since our previous study, service performance went from troubled to favorable at least on an absolute basisrebounding overall to levels.

The average case fill rate rose 1 percentage point, to Cost behavior and cost-drivers do affect flexible budgets in a number of ways. For example, since products do drive costs for each part, then the budget has to remain flexible during this process because of inflation or other macroeconomic concerns that could arise because of the possibility that price could change at any moment.

HRCI recertification credit online e-Learning Package+SHRM PDCs includes 60+ pre-approved Business (Strategic), HR (General), Global (international), and California credits for PHR, SPHR, GPHR, PHRi, SPHRi, SHRM-CP, SHRM-SCP. For the first time since , CPG companies have improved their service levels, but not without incurring more cost.

For some of our study participants, the improvements came automatically—primarily through lower fuel costs and milder winters.

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