What would happen if everyone in your company followed a disciplined approach to cost reduction? Go ahead — imagine it. What would it look like? How can it be done?
The answer — smart cost management .
Effective cost management must start at the design stage. As much as 90-95% of a product”s costs are added in the design process. That is why effective cost management programs focus on design and manufacturing. The primary cost management method to control cost during design is a combination of target costing and value engineering.
Target Costing Objectives:
Value Engineering:
The connection to function: An organized effort and team based approach to analyze the functions of goods and services that the design stage, and find ways to achieve those functions in a manner that allows the firm to meet its target costs.
The result: Added value for your company (development costs on-line with added value for your company; development costs on-line with selling prices) and added value for your customer (higher quality products that meet, possibly even exceed, customer expectations.)
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