High product cost or the increasing cost of commodities has become a phenomenon we have observed lately. We have witnessed several factors influencing the pricing, of which the major has been Covid-19 which shut down economies. During the pandemic, the businesses could not function at all. The companies exempted from the Covid-19 lockdown could not perform to their optimal level. And the outcome is as expected. The rise in demand did not let the cost go down.
High Product Cost
Labor
- Insufficient production
- Increased labor cost
Packaging/ loading
- Increased warehousing cost
- Quality of the package
- Increased packaging cost
Freight
- Increase in the fuel price
- Import / export, VAT or exchange fees
- Customs formalities
- Ensure optimum load capacity
Tooling
- Low efficiency of the equipment
- Improper maintenance
- Aging of machines
Raw materials
- Inspecting the raw material
- Cost incurred to store the raw materials
- Quality of the raw materials
- Shelf life of the raw materials
Taxes
- Third party compliances
- Increased tax structure
- Change in tax slabs
- Additional taxes
Aside from the factors mentioned above, several other factors directly impact the cost are raw materials, freight, tooling, marketing & taxes. A rise in the cost of any above would force the producer to increase the price and leave us with a high production cost.
Who should use the High Product Cost Template template?
- This fishbone contains most of the reasons for high product cost. It is very useful when one wants to learn the factors that affect the product cost and make it unreasonably high.
Why use this template?
- Get a proper idea about the reasons why the product is so expensive.
- This Ishikawa diagram makes the template creation and designing process for other problems simple. One can customize the template and easily understand the techniques of arranging the causes with the help of smartQED tools to meet their requirements.
- Create your own template or reuse this for any type of problem analysis in smartQED.
Curated from community experiences and public sources:
