![]() ![]() Food Industry: Restaurants like Chipotle utilize local sourcing to reduce transportation costs and ensure fresh ingredients.Technology: Tech companies like Apple source components from various global suppliers to negotiate better pricing and reduce dependency on a single vendor.Strategic Sourcing and Supply Chain Management Service Industry: Automating customer service through AI chatbots can decrease labor expenses related to customer support.Real Estate: Green building practices like installing energy-efficient HVAC systems can lower ongoing maintenance and utility costs.Retail: Private-label products enable retailers like Target to offer quality goods at lower prices by controlling material and production costs.Construction: Alternative and/or sustainable materials can lower construction costs without compromising quality.An example is General Motors securing a supply of raw materials for electric vehicle batteries. Manufacturing: A manufacturing company may negotiate bulk purchase discounts with suppliers, reducing raw material costs.For example, the city of Baltimore’s Enterprise Zone Program offers property and income tax credits to encourage development in targeted regions. Real estate development: Developers may obtain tax incentives for developing underutilized areas.Here are some examples of real-world applications of COGS optimization. However, businesses approach this differently based on their industry. Optimizing the cost of goods sold is an essential business strategy to maximize income from regular operations. For instance, when calculating COGS, a real estate investment trust (REIT) must comply with specific IRS guidelines related to depreciation and interest expenses. Other businesses include law firms, business consultants, accountants, and so on.Ĭompanies can optimize their tax positions by carefully aligning COGS calculations with IRS regulations. ![]() These include appraisal companies in real estate. Note that some industries cannot use COGS for tax reporting, particularly service industries (since they have no inventory to speak of).
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