Make (Company) Cost

In the analysis of a manufacturing company's approach to managing functional costs, this term refers to the cost of manufacturing, assembling and packaging the product.

Example 1:

Lone Star's cost of goods sold is significantly lower than its competitors as a result of its decision to pursue joint venture relationships and to import cement. Lone Star was the first company to import significant quantities of cement in 1984. Other domestic manufacturers copied this approach. By 1990, 70% of the cement imports were purchased by domestic producers.
(Year 1991-SIC 3241)

Explanation: Lone Star originally had a different approach to the Make Cost than its competitors. It chose to import some of its cement rather than manufacture it itself.

Example 2:

Wilson designed its products to use a simplified, but more expensive, method to make, quickly, items distributors did not have in stock. Wilson could provide any product in 10 days, compared to 25 days for its competitor, Formica. This flexible approach cut inventory costs for both the Company and its customers.
(Year 1990-SIC 3089)

Explanation: Wilson employed a different approach to its Make Costs than did Formica. While its Make Costs were higher, its Convenience, in its short order cycle time, was better.

Example 3:

Energy accounts for the largest portion of production costs. Lafarge acquired Systech in 1987, a leading developer of technology in recycling of waste fuels. Systech reduces the energy cost 30-40% by recycling waste fuels. Lafarge is currently managing Systech systems in four of its own plants. Competitors have copied this approach. Two competitors that have copied this approach, Lone Star and National Portland Cement, have hired Lafarge to manage their systems.
(Year 1991-SIC 3241)

Explanation: Lafarge has developed an approach to managing fuel that reduces its Make Costs in the cement industry.

Example 4:

Encyclopaedia Britannica, Inc. is losing market share to CD-ROM competitors. Britannica hasn't produced a CD-ROM version, in part to avoid offending its sales force, who would receive lower commissions due to the lower price.
(Year 1994-SIC 2731)

Explanation: Britannica spent much more manufacturing money than its competition because it produced paper books in competition with the encyclopedias sold on CDs. Encyclopedia Britannica had a far higher Make Cost than did its competition.

Example 5:

Scott announced it would sell its timberland and pulp operations.
(Year 1995-SIC 2600)

Explanation: The timberland and pulp operations are part of Scott's Make Costs. These operations supplied Scott with raw materials for its bathroom tissue. The Company will now outsource these operations from another company. This is a change to its approach to Make Costs.