Beruflich Dokumente
Kultur Dokumente
Target costing
Customer oriented approach. Suppliers are included in the design team, they can suggest standard parts/alternative parts instead of custom-design parts which will reduce the product cost. Used by Japanese companies (more than 80% in assembly industries & more than 60% of companies in processing industry and recently adopted by Europe and the USA. A range of specialized tools , including functional analysis, value engineering, value analysis, concurrent engineering were introduced to support TC. TC is most useful in situations where majority f product costs are locked in during product design stage. This is the case for most manufactured products, but a few services. TC results in less value in the production of raw materials such as chemicals.
What is required?
Team approach Team members include: 1.designers 2. engineers 3. Purchasing 4. manufacturing 5. marketing 6. management accounting personnel The discipline of a team approach ensures that no particular group is able to impose functional preferences. Aim During product design process is that elimination of product functions that add costs which do not increase market price.
TC- 2011 Baba 4
Problems with TC
Development process can be lengthened to a considerable extent ,since design team may need a number of iteration. Large amount of cost cutting can result in finger pointing in various parts of the company. Having representative from a number of departments on the design team can some times make it more difficult to reach consensus.
Above problems can be solved by choosing s strong team manager with exceptional knowledge of design process, good interpersonal skills & commitment to staying within both time & cost budget for design project.
TC- 2011 Baba 6
Implementing TC system
Procedures: 1. Create charter 2. Obtain a management sponsor. 3. Obtain budget. 4. Assign a strong tem manager. 5. Enroll full time participants. 6. Use project management tools.
2.
3. 4.
5. 6. 7. 8. 9.
10
Objectives of VE & VA is to reduce costs & achieve quality level that satisfies improvement in product design, changes in material specifications, modification in process methods. VE involves searching for opportunities to modify design of each component or part of product to reduce cost, but without reducing functionality or quality. VA entails studying the activities that are involved in producing product to detect nonvalue-adding activities that may be eliminated or minimized to save costs but without reducing the functionality or quality of product. VA is systematic evaluation of all aspects of the value chain. To implement VE, managers distinguish between value added activities & costs from non value added activities & their costs.(value added cost is that cost which if eliminated would reduce actual or perceived value or utility-usefulness)-One of the goals of VE is to reduce & possibly eliminate non-value added costs & increase efficiency of value added activities. Non value added cost (producing defective products, rework, machine breakdown). Gray areas-supervision, production control, ordering, receiving VA is used in TC to reduce costs by analyzing trade offs between different types of product functionality (-features) & total product costs An important first step on VA is to perform consumer analysis (Critical Consumer Preference) during design stage TC- 2011 Baba 11 .
Another approach to VE is to call on the services of a companys suppliers t0 assist in the cost reduction efforts. Another cost reduction approach is to allocate cost reduction based on presence of certain product feature in product design.
TC- 2011 Baba 12
Kaizen costing
This is Japanese term for a number of cost reduction steps that can be used subsequent to issuing new product design to factory floor. It is a mechanism for reducing and managing costs. Improvement to the process rather than applied during design stage. Constantly refining the process & there by stripping out extra costs. The cost reductions from Kaizen Costing is much smaller than VE but are still worth it. Cost reduction through the increased efficiency of the production process. To reduce the cost of components and the products by a prespecified amount. To reduce or eliminate waste in the production process. It is heavily on empowerment of employees Workers are given more responsibilities to improve the processes and reduce costs.
13
Methods of establishing TC
Methods of establishing TC
Subtraction Method
TC = Targeted Price - Targeted Profit
Targeted PROFIT
Addition Method the traditional costing Targeted Profit
% of sales % of costs % of Total costs % of Manufacturing Costs % of Prime Costs % Of ABC
%ROI
TC- 2011 Baba 14