Supply Chain Cost Management: The AIM & DRIVE® Process for Achieving Extraordinary Results

Develop a Model to Select the Key Cost Drivers

If you feel uncomfortable choosing a key cost driver by observation, you can put your logic into a model and then make your selection. Figure 6-3 shows such a model. Start by listing the secondary or tertiary costs from column ‘I’ of your Master Worksheet (Figure 6-2). For our Customer Services team at Anything Inc., the cost elements would be direct labor, direct material, and freight. Next, estimate the weights for each of the cost elements. Remember the sum of the weights must equal 100 percent. You can use actual data or, from a sample population, take actual readings and then estimate the weights. Using a combination of actual data and estimates, the Customer Services team at Anything Inc. ...