SG&A Costs Within an Exterior Building Products Category
Challenge
A major exterior building products manufacturer sought to understand its SG&A costs relative to its peer group. The company believed that its manufacturing costs were comparable to these competitors yet the Client was not competitive in certain pricing situations and wanted to determine if it was at a cost disadvantage.
Approach
Principia developed a rigorous approach to model each competitor's cost-to-serve and all general administrative costs for three competitors. Interviews with the targets and key customers, suppliers and competitors were conducted to collect the raw data as well as the subtle differences in how each company allocated soft costs including corporate overhead. Our project team worked with the Client to map the details of each competitor against the Client's organization and business approach. This collaborative analysis led to a harmonization schedule for comparison across all competitors and the Client.
Outcome
The Client determined that its current approach to doing business resulted in significantly higher SG&A costs relative to key competitors. The results of the Principia study were able to pinpoint the specific areas to reduce cost without impacting its ability to serve the market. A cost reduction program was implemented to bring SG&A expenses down and improve margin by 3 percentage points over a 12 to 18 month period.
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