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Articles written by Doug Hicks

Customer Profitability: The Why and How of SG&A Costs

by Doug Hicks | Sep 2014

Many costs that separate desirable customers from less-desirable customers lie hidden in that great “blob” of costs christened by most organizations as “selling, general and administration” or simply SG&A. ... Read more »

The “Cost to Serve” Customer Fulfillment

by Doug Hicks | Aug 2014

Manufacturers can gain critical insight on customer and product profitability when “cost to serve” activities are measured and assigned. ... Read more »

The Fallacy of Profit as a Percentage of Sales: Part II

by Doug Hicks | May 2014

I previously explained why profit as a percentage of sales is a flawed performance measurement for a manufacturing organization and suggested alternative measurements. These alternatives are, however, only surrogates for this somewhat more complex methodology. ... Read more »

The Fallacy of Profit as a Percentage of Sales: Part I

by Doug Hicks | Mar 2014

Profit as a percentage of sales is about as good a tool for measuring the value of a product or customer to an organization as a thermometer is for determining a wind-chill index. Consider this approach for true measurement. ... Read more »

Labor Hours or Machine Hours: Which is Preferable?

by Doug Hicks | Dec 2013

A manufacturer that fails to segregate indirect and support costs driven by the operation of equipment from those driven by the work of individuals will seldom arrive at product or process costs that reflect economic reality. ... Read more »

Measuring and Assessing the Cost of Manufacturing Cells and Lines

by Doug Hicks | Oct 2013

If a company is to understand the benefits that accrue as a result of cellularization, it cannot follow an obsolete, direct labor-based costing model that fails to accurately reflect the fundamental economics that underlie a 21st Century manufacturing firm. Doug Hicks provides a step-by-step underst ... Read more »

Material Cost vs. Price Plays Important Role in Sensitive Market

by Doug Hicks | Jun 2013

Manufacturers often use a 200-year-old, outdated process to arrive at the cost of producing product. Failure to incorporate these 21st century cost components leads to inappropriate and unprofitable pricing and investments. ... Read more »

Is Depreciation Expense a Misleading Illusion?

by Doug Hicks | Oct 2012

  “Sunk costs are irrelevant" is a principle stated in Shlomo Maital’s book Executive Economics and in almost every book on decision making ever written. Despite this well-accepted principle of decision science, most companies continue to include their biggest sunk cost as a majo ... Read more »

The Dangers of Direct Labor-Based Costing at Orthopaedic Device Manufacturers

by Doug Hicks | Jun 2012

As we begin the second decade of the 21st Century – over a quarter-century into the “cost measurement and management revolution” – most U. S. manufacturers, including those who precision manufacture orthopaedic devices, continue to base not only their day-to-day cost accounting systems, but ... Read more »