Sep 052012
 

Yes, you read the title correctly.  It may sound like an oxymoron, but some form of this statement is uttered every day in the world of Product Cost Management (PCM).  Usually, a company, will say, “I don’t have time for profit.” right before it notifies the PCM software vendor that it cannot buy the vendor’s tool at the current time.   Sometimes, the statement is spoken to a PCM consultant who is proposing an engagement to boost the profit of the company.

The customer typically does not convey the thought exactly as the title says.  It is usually more eloquent, such as:

Um, yes well, I’m sorry, but times are pretty bad here.  We just got our quarterly results and sales [or profits] are down.  Our management is having to really tighten their belts, so we have to put the implementation of your software [or your consulting engagement] on hold until times get better.  It’s a shame, because everyone really liked your software and thinks it would significantly benefit our bottom line, but we just can’t invest in anything right now.

Actually, I am a pretty naive guy, so maybe this is the customer’s way of politely telling the vendor that they are not interested in the vendor’s or consultant’s product or service (or that there are better options to increase profit).  Maybe the customer is trying not to hurt the sales guy’s feelings — similar to the girl that makes up legitimate excuses why she can’t go out with you every time you ask her out.  However, I actually believe most customers are very honest about these things, and they are telling the vendor the truth.

Manufacturing companies are really saying:  “This is no time to think about profit! We’re doing badly enough already.”

Paraprosdokians

There is actually a word for a statement such as the title of this post.  It’s called a a paraprosdokian — a statement that leads you to start drawing conclusions in one direction and then finishes in an unexpected (and often humorous) different direction.    Winston Churchill, Groucho Marx, and Henny Youngman were all masters of these grammatical zingers.

The difference here is that I don’t think the customers intend the paraprosdokian.

No time for profit right now

I have observed an interesting phenomena during my years in the Product Cost Management.  One would think that the companies in need of Product Cost Management are the ones that are facing a profit problem or a sales decline.  The idea is that the PCM improvements would generate greater profits to make up for sales volume loss.   However, these firms are regularly the ones that will delay buying a PCM tool or seriously engaging a PCM expert.

No time for Product Cost Hiller Associates

This phenomenon reminds me of a cartoon that one of my bosses once showed me (see figure to the right).

Conversely, the companies that are the fastest buyers of PM tools and consulting are those that are doing really well and want to keep on winning. These companies use PCM as a steroid to pump their profits, but in reality, it is the companies having a tough time that truly need the vaccine of Product Cost Management.

I find this an ironic Catch 22.

Damn the Torpedoes, Full Speed Ahead!

To firms who are facing difficult quarters with sales and profit, I would say, that most of your business brothers sympathize.  We have all been in your position before and may be in it with you right now.  However, now is NOT the time to accept less profit. Now is the time to make more profit, so you can trade-off profit vs. increase sales through market share.

I’m not sure my reasoning will convince all the firms out there that are delaying taking serious action to improve their PCM culture, process, human resources, and tool kits.   However, I do hope that the decision makers in some of the firms that read this article will think twice before summarily delaying the improvements on Product Cost Management.  If you and your fellow managers and executives have already agreed already agreed that PCM is needed, don’t be so quick to casually push off the PCM work until next quarter or next year.  The time for more profit and sales is now.

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Jul 232012
 
The 6 Reasons Why People and Organizations Withhold Data (Habeas Corpus Data, Part 2)

Last week we began talking about a common problem in many projects, including Product Cost Management: the withholding of needed data for analysis and modeling.  We also talked about the many reasons, some legitimate and some not, why people refuse to share data. Those reasons are summarized in the graph below. Then I introduced one Read More!

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Jul 192012
 
Habeas Corpus Data (Part 1)

Data. At the end of the day, the data and assumptions that we use in Product Cost Management, specifically in cost models, is as (or more) important than the equations and the approach to modeling itself.  The classic example in cost modeling is raw material rates ($/kg for steel, plastic, etc.). A close second and Read More!

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Jul 092012
 
The Voice of Should-Cost (Voices Series, Part 3)

It’s been a couple of weeks, since we discussed the Voices series, so if this post is interesting to you, you may want to go back and read the first two: Do you hear the voices? (Voices Series, Part 1) The Voices of Discord in Product Cost Management (Voices Series, Part 2) In these first Read More!

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Jun 252012
 
Don't Pave the Cowpath; Plan the Autobahn (Part 3 of Pete Schmitz at Harley-Davidson)

Today we have the third in our series of insights from the article “Putting it All Together at Harley-Davidson.” At the end of the article, Pete Schmitz strikes a chord in my heart when talking about supplier selection:     [Schmitz] Don’t pave a cowpath! We believe in never automating a bad process – first, Read More!

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Jun 182012
 
What are you trying to boil? (Part 2 of Pete Schmitz at Harley-Davidson)

To continue my thoughts from last week’s blog regarding the article  “Putting it All Together at Harley-Davidson“, I’ve put together some additional insights below. Keep Your Product Cost Management Promises and Don’t Force Others into Promises They Can’t Keep I am reminded of a story about, Saint Augustine of Hippo, a brilliant theologian, who meets Read More!

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Jun 112012
 
Where's Finance and Accounting in Product Cost Management? (Part 1 of Pete Schmitz at Harley-Davidson)

I just read the article “Putting it All Together at Harley-Davidson” in the July 2012 [July??] Blue Heron Journal.   The article is a profile on Pete Schmitz, a Honda veteran in Product Cost Management, who now works at Harley-Davidson.    According to the article,: “[Schmitz] combines procurement, design, manufacturing and cost expertise in a Read More!

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May 292012
 
What's in a Product Cost Part 1 -- Grand Theft Auto [Capital]

One thing that is interesting about Product Cost Management is that people have different thoughts as to what is included in the product cost.  Is the product cost the raw material, labor, and direct  labor?  What about the capital tooling?  What about logistics and shipping?  Oh, and what about warranty cost or end of life Read More!

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May 212012
 
The Voices of Discord in Product Cost Management (Voices Series, Part 2)

In last week’s post “Do you hear the voices? (Voices Series, Part 1) ” we talked about the different voices that speak throughout the product life cycle and how they relate to Product Cost Management. This week, we’ll talk about some voices give bad advice and expectations. As the diagram to the left shows (click Read More!

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