Raw Materials Expense as a Percentage of COGS
This PDF report includes benchmarking data (in a visual, chart-based format), an comprehensive KPI definition, characteristics of high performers and technical details on measuring Raw Materials Expense as a Percentage of COGS. Purchase and download this easy-to-understand, presentation-ready report immediately to compare performance levels, set attainable performance targets, and push towards best-in-class performance for this KPI.
What is Raw Materials Expense as a Percentage of COGS?
The expense incurred through purchasing raw materials divided by the total cost of goods sold (COGS) incurred over the same period of time, as a percentage.
Why should Raw Materials Expense as a Percentage of COGS be measured?
Raw Materials Expense as a Percentage of COGS measures the expense incurred through purchasing raw materials (i.e., the materials directly used in the production of a product) in relation to the cost of goods sold (COGS) incurred by the plant, or production facility, over the same period of time. Excessive expenses spent on raw materials may be related to multiple factors, including inefficient procurement processes (i.e., purchasing unneeded or overly expensive raw materials), low quality of raw materials purchased (such low quality materials can cause in increase in rework due or scrap rate due to a high number of defects), inaccurate demand forecasting methods and sub-par production employee training and performance. High values for this metric can drive up the prices of the finished products which can make them that much more difficult to sell to customers. Such unmanageable prices can, furthermore, expose the company to reputational and financial risks born from not being able to pay off its liabilities on time and high degrees of customer dissatisfaction.
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