Company cost structures

To aid this discussion, we ll call on tiiree manufacturing companies that compose a supply chain and that have very different cost stmctures. The companies names are Old Line, High Tech, and Process. We ll look at them first as individual companies and later as a supply chain. 

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Yet waste elimination continues to elude many companies in every sector, including the refinery section and activity from refinery waste (which is a function of their production system design). It may not matter how a refiner categorizes the waste or how the refiner chooses to pursue waste elimination. One thing remains constant that once identified, waste can be eliminated. There are models and structures that allow a refiner to identify and eliminate waste to increase productivity, and hence cost structures, that have a direct impact on refinery operations and, more than all else, profitability. Waste elimination through identification (by judicious analysis) and treatment subscribe to the smooth operation of a refinery. 

An indicative cost structure for a fine-chemical company is given in Table 7.3. The operating schedule also has a significant impact on the production costs. Whereas continuous plants typically run 24 h per day, there is more... 

Table 7.3 Indicative Cost Structure of a Fine-Chemical Company...

Explanations and details of these terms can be obtained in various books and pamphlets, for instance, Allen (1980) and Liversey (1983). No one parameter is self-sufficient, and alone gives a complete view of the financial status of a project or product. Therefore a number of parameters are usually calculated, and used in conjunction. They serve to give indications of how to minimise the period over which capital needs to be committed to a specific project, to show changes in the cost-structure of the process with time, and to reduce the time taken to convert the material, labour and overhead resources (the working capital) into cash in the form of profits from sales. That is, to make the cash-flow as favourable as possible. Each comparer will have different criteria as to what constitutes an acceptable financial risk when evaluating a project. Obviously healthcare product/pharmaceutical companies have quite different criteria to companies manufacturing bulk chemicals. 

Fig. 43. Personnel cost structure (own analysis based on 2005 company data)...

The overall funding requirement therefore needs to take into account the cost of the acquisition, the development costs, the marketing costs and the cost of capital. Only if the whole equation works and yields a positive result which includes all these elements will management be able to make a judgement on the suitability of the investment for the company. In structuring transactions therefore it is extremely common to see the initial exposure, the upfront costs, a licence or an acquisition deferred as much as possible to reduce the risk in the transaction for the acquiring company and its shareholders. Funding capacity thus often becomes one of the main constraints of deal selection in business development. 

Few companies are as dependent upon research as those in the pharmaceutical industry. The development of a new drug is enormously costly, so companies invest heavily in computational approaches to drug design, with the aim of reducing the number of chemicals that need to be screened for therapeutic activity, and thereby shortening the time to market for new drugs. Typically, pharmaceutical companies use structure-based design to address computational questions such as... 

That is why the object of this review is not to show all electrosyntheses that have been commercialized or produced at least in a pilot plant, but to give the reader an idea of the structure of some prominent electrochemical processes. This should be helpful for the reader to estimate—together with one s engineers—the cost structure of electrochemical processes for a company on a specific site [5],... 

Bottom right quadrant. When value is transferred from shareholders to stakeholders, the company incurs a fiduciary liability to its shareholders. Actions intended to create stakeholder value that destroys shareholder value put into question the company s ability to create societal value over time. Avoiding offshore sourcing to protect American jobs is an example of actions that could create value for some stakeholders while destroying value for shareholders. Bringing back offshore jobs and union strikes to Keep Jobs in America may create job security for American workers in the short term, but can hurt companies whose operating cost structures become uncompetitive. 

Yield, productivity, eluent consumption and purity are clear defined objective functions, while total separation cost and other objective functions related to economics depend on the individual company and are based on site-related parameters. Therefore, the calculation of total separation cost is complex due to various influencing parameters and cost structures. This chapter proposes the following cost functions, which can be easily adapted to specific conditions ... 

Objective Junction to be able to compare total separation costs independently of production rate, the total separation cost per product amount CspeCjtotai is used. Since the consideration of fixed costs in the cost structure is usually handled differently and is subject to company policies, it does not make sense to consider the fixed costs in this book. Therefore, the optimization is focused on variable costs only ... 

Please note that batch and SMB chromatography are compared here regarding the productivity and eluent consumption and not regarding the total separation cost. This is because productivity, eluent consumption, yield and purity are clearly defined functions, while the total separation cost and other objective functions related to economics depend on the individual company. Therefore, the magnitude of economic benefits in the application of SMB in comparison to batch chromatography depends on the applied cost structure. Jupke et al. (2002) have provided a detailed comparison between batch and SMB chromatography regarding the total separation cost. 

The cost imperative comes into play greatly with fuel cell membrane assemblies. It is up to the automotive chemist to design ways to improve the cost structure of these assemblies. For instance, the perfluorosulfonic membrane (Nafion) by DuPont is a very expensive component [13], Other companies, such as Arkema and PolyFuel, are proposing other films as a cost alternative to the Nafion product [14,15], The precious metal catalyst used in membrane assemblies is applied to carbon using batch methods if other deposition methods (such as vapor deposition) can be developed, cost can be reduced [12],... 

Marketing costs comprise promotion (advertising and detailing), sponsorship of symposia and other promotional events, and support functions such as market research. Between 1987 and 1990, in the six companies surveyed by OTA, 33.6 percent of sales were devoted to marketing and administrative costs. If Eli Lilly s cost structure is typical of the research-... 

Internal failures must be thrown out or recycled. These should all be detected in products where a batch can be sampled and tested. External failures are much more serious and costly, although it is not always easy to quantify the cost. In the case of a "normal" product, the customer will return it. If he is really unhappy he will not buy it again. If a batch of medicine is faulty, the F.D.A. (to name but one national authority) may recall it. If the agency is really unhappy about the company s structures, procedures, and methods, it may well take stronger action. 

The transportation models discussed in this chapter assume that the location of the facilities involved is given. Obviously, the location of various facilities plays an important role in the total transportation costs incurred. The location of factories, warehouses, and distribution centers plays a major role in the quality of service and competitiveness of a manufacturer, while transfer terminals and depot facilities greatly influence the cost structure and effectiveness of a transportation company. 

An effective supply chain is built for purpose. It is designed with the goal in mind. As companies have implemented global systems, improved the cost structures, and implemented lean programs, the supply chain has become less agile. Today, for many, it is brittle. It is stronger in the middle than at the ends. 

Figure 27.3 shows the eosts of aetivities in each of the three companies. The cost structures enable us to differentiate between internal and external cost at each level. For example, Proeess eontributes 5 percent to total costs, 30 percent is material, and 70 pereent is internal eost. So, for every 1 in sales of the supply ehain s produet, Proeess contributes 3.5 percent in internal cost and buys 1.5 percent in material. In this case, it is a commodity material that is not amenable to eost reduction efforts. We can also place activity costs at Old Line, at 9.0 percent, in perspective. A display over all activities in the supply ehain will also focus on operations improvements in any of the three eompanies. 

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