The Challenge
A textile manufacturer supplying major global retailers was negotiating blind. SAP cost structures did not accurately reflect actual material consumption, labor routing, or overhead distribution, which meant that the commercial team could not determine with confidence whether the prices they were quoting were profitable.
International buyers expected transparency and precision. The manufacturer could not provide either, resulting in inconsistent pricing, margin erosion, and a credibility gap with customers who scrutinized every number.
The Approach
A comprehensive costing redesign recalibrated every cost component within SAP based on validated production and financial data:
- Material standards were updated to reflect actual loss rates rather than theoretical targets
- Energy consumption was linked to real machine behavior rather than estimated averages
- Labor routing times were corrected to match how work was actually performed on the floor
- Overhead distribution was restructured to align with true cost behavior across the product range
- A unified costing template was developed to enable meaningful comparison across products and customer accounts
- Commercial teams were trained to interpret the new costing outputs accurately and use them confidently in negotiations
The Outcome
Margin realization improved by 3 to 5 percent across key product lines, equivalent to $350,000 to $600,000 annually. Negotiation confidence increased, pricing risk decreased, and the company gained the financial clarity needed to make strategic product mix decisions.
The transparent, accurate costing system strengthened credibility with global retail customers and protected the long-term value of those relationships.