Podcast Series. Episode: Understanding Cost Structures

Survive & Thrive: Understanding Cost Structures

In this episode of the Survive and Thrive series on the Quality Hub podcast, host Xavier Francis is joined by Scott Dawson of Core Business Solutions and Jeanne Perron of IMEC to explore how small manufacturers can regain control of their cost structures and supplier strategies. Jeanne introduces the concept of the “silent slide,” where suppliers fail to pass on cost savings, and emphasizes the importance of using commodity price indices to negotiate fair pricing and avoid overpaying. The conversation covers practical steps for identifying key suppliers, preparing data-driven negotiations, planning for tariff volatility, and leveraging resources like IMEC and the nationwide MEP network to build resilient, informed supplier relationships. 

Summary: Survive & Thrive Understanding Cost Structures Episode

Host: Xavier Francis

Guests: Scott Dawson, President of Core Business Solutions and Jeanne Perron, Technical Specialist at IMEC

In this episode, host Xavier Francis is joined by Scott Dawson (President of Core Business Solutions) and Jeanne Perron (Technical Specialist at IMEC) to address how small manufacturers can better navigate rising costs and unpredictable supply chains. The conversation focuses on “controlling what you can”—specifically around cost structures, supplier negotiation, and strategic use of commodity indices.

Jeanne shares insights from her 38-year career in manufacturing and procurement, offering practical strategies for using data-driven tools like economic indices to keep supplier pricing in check. The episode outlines how small manufacturers can avoid “the silent slide”—a scenario where companies unknowingly overpay suppliers for long periods—and instead take a proactive, informed stance on pricing, contract negotiation, and reshoring considerations.

Key Takeaways for Small Business Owners

1. Beware the “Silent Slide”

• This refers to the subtle and gradual overpayment of suppliers over time.

• Without monitoring costs, businesses may continue paying outdated or inflated rates—even when market prices drop.

• Suppliers often won’t voluntarily reduce prices unless challenged.

2. Use Economic Indices to Benchmark Pricing

• Indices (like those from the Federal Reserve Economic Data or commodity exchanges) help track the actual market price of materials (e.g., steel, copper, eggs).

• Monitoring these allows you to understand pricing trends and make informed purchasing decisions.

• Negotiate index-based pricing models with suppliers (e.g., prices go up/down based on 3-5% changes in the index).

3. Improve Supplier Conversations with Data

• Referencing indices in negotiations removes emotion and mistrust.

• Helps shift the conversation from price arguments to value-added topics like quality, delivery, and service.

4. Focus on High-Impact Spend

• Don’t try to index every supplier—target the top 5-10% of suppliers representing the bulk of your spending.

• Apply the 80/20 rule to focus effort where it matters most.

5. Plan for Tariff and Supply Chain Shocks

• Tariff policies are volatile; plan for worst-case scenarios, especially if sourcing from high-risk countries like China.

• Consider reshoring or nearshoring to reduce long-term risk.

• Free Trade Zones (FTZs) can help mitigate tariff impact by delaying tax burdens until goods are released.

6. Leverage MEP Centers for Support

• Manufacturing Extension Partnership (MEP) centers, like IMEC in Illinois, offer support on cost management, negotiation, supply strategy, and more.

• MEPs are nonprofit resources across all 50 U.S. states and territories.

Memorable Analogy: Pizza and Eggs

Jeanne illustrates cost dynamics through the price of a pizza:

• If a $10 pizza has $6 in material cost and eggs (a component) rise in price due to avian flu, that increase should be reflected in pricing strategy.

• If not monitored, it impacts margin or customer satisfaction, underscoring the need for transparent cost tracking.

Final Thought

“Thriving in a changing world starts with knowledge and the courage to act on it.”
— S&T Podcast Series

With uncertainty everywhere—from tariffs to inflation—data and preparation are your best tools for control. Use indices, revisit supplier contracts, and lean on expert resources like MEPs to position your business not just to survive, but to thrive.

The Quality Hub podcast is where we chat with ISO experts about “all things Quality.” Our goal is to share the knowledge we’ve gained by working with ISO 9001 Quality Management Systems, ISO standards, and other business best practices with our podcast listeners. We want you to be encouraged by our education and experiences. Visit the ISO 9001 Podcast page to learn more and listen to more podcasts.

If you are interested in ISO 9001 Quality Management Standard Certfication, visit our ISO 9001 page to learn more.  If you are seeking help in implementing ISO 9001 or another standard, just reach out for a free quote for Core Business Solutions’ consulting services.