Value Driven Design and Target Cost Management

Target Costing is a powerful management concept to support the New Product Introduction (NPI) process.

It is simply expressed as setting a target cost based on the difference between the price the customer is prepared to pay and the profit the manufacturer wishes to make.

Setting cost as an independent variable in this way challenges the firm to drive hard to reduce manufacturing and product life-cycle costs.

Six main principles must be maintained for success:-

1. Price drives Target Cost setting
2. All must focus on customer requirements
3. Design centred product cost management and control
4. Target costing projects must involve project teams assembled from all functions in the firm.
5. The complete product life-cycle must be managed aggressively to keep down both the product acquisition and ownership costs.
6. The firm’s value chain must be deployed to meet the cost targets.

The new product life-cycle has four major steps or phases to be managed rigorously:-

• Setting product strategy and plans in the context of the business strategies
• Product concept development and feasibility must pursued with customer cost objectives clearly in view
• Similarly new product detail design and development must have the necessary systems and technology support to enable cost, functional and quality targets to be met with equal confidence.
• Product launch is the FINAL release of all the product support information for the whole product life cycle.

Therefore, in many businesses, a step change in performance is necessary to be world class.

Value Driven Design is committed to assist clients to achieve these objectives. Our consultants and engineers have many years of industrial experience as design engineers, manufacturing engineers, managers and consultants. Having worked on many process and change management projects to support business improvement they are able to help you achieve excellent results.