More on the Toyota Cost/Profit Model
Great post here by Bill Waddell about the Toyota “Profit/Cost” model of
Profit = Price – Cost. He elaborates on it as “Profit = (Price x Volume) – Cost and points out origins tracing back to Andrew Carnegie in the 1800's.
Most companies, even today, operate under the model of thinking Price = Cost + Desired Profit. Prices are not set by companies, for the most part, they are set by the market.
The only thing you have under control is costs. But, most American companies “cut costs” by closing plants and laying off people. As Bill points out, that also cuts volume, which could very well cut profit.
Here are links to earlier posts of mine on this topic:
What do you think? Scroll down to comment or share your thoughts and the post on social media. Don't want to miss a post or podcast? Subscribe to get notified about posts via email daily or weekly.
- Oops! Another Mistake During a Webinar About Mistakes - September 30, 2022
- Damon Baker on Lean, Private Equity, and the Ownership Works Initiative - September 28, 2022
- Reading About Lean at GE in Italy Makes Me Hungry for Pizza, While Savoring Employee Empowerment - September 27, 2022