Tuesday, April 8, 2014

True cost and why it is important

Stuart McDaniels,
Materials Manager
What is "true cost"? It is the total amount paid for a product once it has arrived at your door. To completely understand the true cost of an item, you have to consider the various charges that are acquired during the manufacturing, packaging and shipping processes.

So, what does this mean? For example, many of us experience this regularly with our cell phone bills. Your provider may offer you a plan with a set number of talk, text and data allowances at a flat price. But, the amount we pay is much more, because in order to use their services we must also pay various fees and taxes. The price of our plan, plus all the fees and taxes rolled together define the true cost of our cell phone service.

In business, it is critical we understand our true costs, which can include packaging, taxes, fees, freight, tariffs and overhead. The extra charges may not be readily noticeable and can add up quickly. When we don't pay attention to the extras, they can potentially destroy any chance of turning a profit. Without a clear understanding of true cost, it becomes nearly impossible to make good decisions on profitability and sourcing.

If you need help figuring the true cost of any of our products, please email at stuartm@trigard.com

This article originally appeared in Trigard Tuesdays, our weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/tuesdays.

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