Target Cost Management The Ladder to Global Survival and Success

With a proven track record for helping companies achieve critical cost reductions without sacrificing customer satisfaction, target costing provides managers and executives with the tools to survive and prosper in today’s increasingly competitive market—without raising prices on customers. Target Cost Management: The Ladder to Global Survival and Success details the preliminary steps required for a company to institutionalize target costing and the two necessary ingredients of target costing—proper organizational structure and cost tables. It describes and illustrates the interrelationships of the major techniques, tools, and methodologies needed to achieve the ultimate success. Jim Rains shares powerful insights harvested during his two decades of studying and benchmarking target costing for leading Japanese corporations including Toyota, Nissan, and Canon. Supplying the understanding and the tools to achieve critical cost reductions while maintaining and even improving customer satisfaction, this book explains the steps needed to reap the rewards of constant, consistent, acceptable, and predictable levels of profitability.

The LadderRung 1Rung 2Rung 3Rung 4Rung 5Rung 6Rung 7Rungs 8 to 10The Rails of the LadderCorporate StrategyFocus on Long-Term Profit Goals and ObjectivesCustomer FocusRespect for Humanity/EmployeesRespect for the EnvironmentLeadershipBasic Concept of Target CostingWhat Are the Characteristics of Strong Enterprises?Roots of Target CostingTarget Costing Becomes Comprehensive Target CostingProfit vs. Profit MarginCost ManagementCost VisibilityEngineering Change RequestsSurvival TripletCultural DifferencesDoes Your Firm Really Need to Do Target Costing?Is Target Costing for My Company?Getting Started on the Target Costing JourneyMyths of Target CostingOrganizational BreadthSteps to Begin Target CostingKnowing What to DoForm Cost Planning GroupConduct Current State AssessmentMission and Vision StatementEmployee TrainingThe Process of Team BuildingTeam PerformanceThe Cost Planning/Cost Management GroupWhat Is the Cost Planning Group?Mission of Cost Planning GroupWhat Costs Should You Establish Targets For?What Is Most Important: Quality, Function, or Price?Cost Management for Purchased PartsWhere to Begin Collecting Cost InformationThe Development of Cost TablesShift in Financial ThinkingThree Major Requirements for Cost TablesCost Table SophisticationMaterial Cost Table DevelopmentDirect Conversion Cost TablesProduct Development Cost TablesCost Tables by ProcessHow to Set the Target CostSubtraction MethodAddition MethodSetting Target Costs by FunctionContingency Cost AllocationSpecial SituationsExceeding the Target CostAllocation of the Target CostAdvanced Applications of Target Costing ConceptsAlpha BrainAlpha Brain BackgroundThe Alpha Brain System: An ExampleThe Model FactoryMetal-Forming FactorySummaryBenchmarking Japanese CompaniesIsuzu (1999, 2003, 2008)Zexel Corporation (1999)General InformationMachining CenterCost and Value Engineering DiscussionToyota Motomachi Vehicle Assembly Plant (1999, 2005)Manufacturing PhilosophyAssembly ProcessMaterial DeliveryQuality AndonToyota (2005)Aisen Seiki (1999)Hitachi Machinery Construction Company (2003)Society of Japanese Value Engineering (SJVE)Omron (2005)Denso (2005)Nissan (2006)Canon (2006, 2008)Each chapter concludes with a Summary

Mr. Rains has over 30 years of value engineering (VE) experience. During this time he has facilitated over 750 teams in VE, lean manufacturing, lean engineering, and competitive teardown workshops. For the past 15 years he has studied target costing from Japanese experts and believes this vital management philosophy leads to constant and consistent levels of corporate profitability. Mr. Rains is a certified value specialist (CVS) and has led numerous international corporations, architectural/engineering firms, and U.S. government DOD installations to successful results. VE studies have included product design, process improvement, procedures, weight reduction, quality improvement, organization effectiveness improvement, product development, process lead time,productivity, and throughput improvements. He has worked in many types of industries, including oil and gas companies, and with A/E firms to improve building designs and associated expenses. His VE and lean efforts have been exposed to a global network, including workshops in Austria, Australia, China, England, France, Germany, Hong Kong, Korea, Kuwait, Mexico, Qatar, Saudi Arabia, Sweden, United Arab Emirates, and the United States. Techniques and tools used in his workshops include the value engineering job plan, quality function deployment, voice of the customer, design for manufacturability/design for assembly (DFM/DFA), function analysis, creativity techniques, paired comparison, idea selection matrix, synchronous thinking, elimination of waste, and team building. Many of these workshops are SAVE International Certified Module I Workshops that just in the past four years have led to over 300 people becoming associate value specialists (AVSs) certified in value engineering. During this time he has been an advisor to three certified value specialists (CVSs). Since 1999 Jim has written and presented 13 papers that relate to VE at conferences around the globe. Jim’s lean manufacturing workshops have led to process improvements of over 20% in productivity, 30% in floor space, 40% in lead time, and a reduction of 40% in inventory. Often these lean improvements were implemented during the one-week workshop. Mr. Rains has extensive expertise in studying, analyzing, and improving material handling systems for large and small manufacturing facilities. These studies result in significant reduction of material handling labor and the associatedequipment. Jim organizes an annual benchmarking trip to Japan that includes visits to companies that excel in value engineering and target costing. Jim first learned about target costing in 1993, when the original material written in English became available. As he continued to learn more about this technique he developed the mindset that companies that fully utilized target costing were special, that these companies are a step or more ahead of their competitors. He began a rigorous study of target costing beginning in 1998, reading books and developing a regular correspondence and personal meetings with Japanese target costing experts. Mr. Rains holds a BSIE degree from Kettering University (formally General Motors Institute) and a master’s degree in industrial management from Central Michigan University. His experience includes 32 years with General Motors, having worked in manufacturing, manufacturing engineering, value analysis, industrial engineering, and product development engineering. He performed these assignments in Rochester, New York; Dayton, Ohio; Juarez, Mexico; and Warren, Michigan. Various assignments at GM included responsibility for improving the processes within the vehicle engineering factory and improving lead time and productivity. Value analysis and lean techniques were applied to achieve these objectives. Mr. Rains worked with advanced purchasing buyers to obtain cost-effective, quality parts from GM suppliers for future vehicle programs. GM uses a technique called supplier cost engineering (SCE) to perform this objective. SCE blends in very nicely with the concepts of the value methodology. Jim worked in the indirect labor group of the GM corporate industrial engineering organization. Here he was responsible for developing and implementing tools for GM facilities to improve the material flow in assembly plants. Using his new labor measurement software, and by implementing material handling best practices, the corporation saved over $50 million annually. From 1991 to 1994, Mr. Rains was manager of divisional industrial engineering for the worldwide operations of the Delco chassis division of GM (now part of Delphi), in Dayton, Ohio. His department was responsible for coordinating value analysis, design for assembly, employee suggestion program, budgets, measurements, and continuous improvement. During this time frame, Mr. Rains was handpicked to lead the charge in establishing, training, and proliferating synchronous implementation workshops. These workshops are designed to identify and reduce wast