About me & philosophy
Mark Lotto | Principal Consultant & Owner
"Like most sourcing leaders, I've sat through the trainings to learn how to talk through negotiations. However, after conducting dozens of product negotiations all over the world, I've found that data speaks louder than words. Discussing a detailed should-cost model built on current material, labor and overhead costs drives transparency and collaboration. Instead of pushing from an initial offer down to a target based on multiple supplier quotes, the negotiation turns into a bottom-up discussion of what a product should cost, leading to a reduced price and savings to the business."
About me & philosophy
Mark Lotto | Principal Consultant & Owner
“Like most sourcing leaders, I've sat through the trainings to learn how to talk through negotiations. However, after conducting dozens of product negotiations all over the world, I've found that data speaks louder than words. Discussing a detailed should-cost model built on current material, labor and overhead costs drives transparency and collaboration. Instead of pushing from an initial offer down to a target based on multiple supplier quotes, the negotiation turns into a bottom-up discussion of what a product should cost, leading to a reduced price and savings to the business.”
Mark Lotto has 15 years of experience using data to solve complex problems around the globe. He has had roles as a Global Procurement Leader, Product Cost Engineer, and Project Manager at General Electric (GE), and has led teams as a US Navy Special Operations Officer throughout the Middle East. He’s developed analytical tools and cost models and leveraged them to negotiate with suppliers to capture savings despite recent supply chain challenges.
Mark holds an MBA from Duke University’s Fuqua School of Business, an MS from the University of Pennsylvania, and a BS in Civil Engineering from Villanova University. He is currently based in the Philadelphia area.
By the Numbers
Technical expertise with projects conducted around the world
Should-cost models created
150
Global negotiations conducted
50
Cost-out workshops conducted
10
Spend negotiated
$600M
Unique parts negotiated
4500
Avg cost-out per negotiation
9 – 11%
Industries Supported
We’ve applied our cost engineering strategies to many industries looking to optimize costs
Storage
Wind
Solar
Oil & Gas
Consumer Electronics
Defense
Industry Descriptions
Storage
Product Cost Solutions assists companies in the energy storage industry to optimize costs amidst rapidly evolving technology. Their should-cost models identify cost-saving opportunities, enabling businesses to understand the material, processing, and overhead costs of their procured battery solutions.
Wind
In the wind industry, reducing turbine production costs without compromising quality is challenging. Our cost engineering strategies provide insights into material and manufacturing expenses, helping clients achieve significant savings and enhance their competitive edge in renewable energy markets.
Solar
Solar manufacturers struggle with maintaining affordability while innovating. We offer cost optimization solutions that pinpoint areas for cost reduction, ensuring that solar energy remains a viable and competitive option for sustainable power.
Heavy Industrial
The heavy industrial and oil & gas sector's volatility necessitates effective cost management for profitability. We help companies identify inefficiencies in their operations and supply chain, leading to improved margins and resilience in market fluctuations.
Consumer Electronics
In the highly competitive consumer electronics industry, Product Cost Solutions assists in optimizing production costs, ensuring that companies can deliver cutting-edge technology at attractive price points to consumers.
Defense
Defense projects require meticulous cost management to ensure optimal resource allocation and security. Product Cost Solutions' cost engineering expertise supports defense contractors in achieving cost efficiencies while maintaining high standards of quality and reliability.
Why pick Product Cost Solutions?
Experts focused exclusively on custom building should-cost models
Execution Focused
We won't come up with a "great idea" and leave it to you to implement… we will partner with you every step of the way
Lean Organization
You interact with the Principal Consultant during every step of the process, avoiding bloated costs associate with large and inexperienced consulting teams, maximizing your ROI
Dynamic & Flexible
We understand market conditions and client needs change. Unlike costly and lengthy MBB engagements, we can adjust rapidly, shortening the timeline from proposal to savings realization
Not a "Black Box"
Our processes are transparent, and our methodologies are easy to follow. Rather than using proprietary software, our tools can be used even after the project is over, avoiding reoccurring fees.
Domain Expertise
Our clients hire PCS because they need to optimize or benchmark their product costs, and because they don’t have this capability in-house, they seek an industry expert.
The best negotiations are fact based & driven by data
We provide this cost intelligence
We build custom should-cost models based on a deep dive analysis
We leverage the should-cost models through partnership at all levels
Capabilities & resources
Technical Expertise
We’ll conduct a detailed review of every requirement needed to make a product
Tools & Framework
Our simple and accurate methodology provides transparency and flexibility without new software
Background Data
We research current market conditions for your specific requirement as input data for our models
Stakeholders we partner with
Supply Chain
Current costs are benchmarked so sourcing leaders have the most up-to-data insights to negotiate with suppliers
Engineering
Design trade-offs are quantified so engineers can implement product modifications to reduce costs
Executives
Concise outputs are provided so business leaders can focus on the most relevant data
Creating a model with sufficient detail is complex but using the model to influence change is the hard part
Our cost modeling process
Sequence
Review drawings, 3D model, or physical product
Map out each step to make the product
Reference our Internal database of industry standards (material, labor, etc.)
Create a model with transparent inputs & outputs
Example output
Cost in USD($), manufactured in Vietnam
Sequence
Review drawings, 3D model, or physical product
Map out each step to make the product
Reference our Internal database of industry standards (material, labor, etc.)
Create a model with transparent inputs & outputs
Example output
Cost in USD($), manufactured in China
FAQ
Questions to ask before starting a should-cost project
Why are the models needed?
Negotiations, engineering redesign, benchmark internal costs, make-vs-buy?
What details are available?
Physical products, bill of material (BOM), specs, CAD files, electronics description and manufacturer?
What tools & framework are available?
Cost modeling software, internal databases, existing spreadsheet models?
What input data is available?
Raw material prices (quantity and location based), manufacturing location details?
What are the supply chain considerations?
Manufacturing location, Incoterms, volumes, current cost breakdown if available?
Bottom-Up
Methodology
Categorize all the parts in scope
Use an internal taxonomy, product description, and industry knowledge
Annual spend forecast
Determine what category gets the most spend, and what you want to go after
Build the should-cost model
Focus on one specific product in the category, but create a model that covers the entire category
Introduce the suppliers to “should-cost”
Introduce the process, inputs, outputs, importance, and expectations
Request a cost breakdown
Focus on one specific part in the category, but ask for a breakdown on several key parts
Compare cost breakdown vs should-cost model
Identify the gaps, and review the differences internally
Explore the gaps with each supplier
Discuss the reason for the gaps in detail, and update the model if needed
Request an updated quote
Make sure the supplier includes a cost breakdown and addresses the gaps
Compare the updated quotes
Review all the quotes on all the products, and give suppliers detailed feedback
Site visit with key suppliers
After walking the process, review the should-cost model in person
Lowest price is achieved
Should-cost model will be complete and can be updated as market conditions change