Target Costing and Value Engineering

In this book you will learn about the practices of seven companies described via case studies, including insights, lessons for adopters, the competitive context that led to implementation, the design of the systems, and the process used. In today's highly competitive environment, your company must learn to develop low-cost, high-quality products that have the functionality customers demand. Target Costing and Value Engineering represents the missing piece in the puzzle of how lean enterprises can successfully compete. What would happen if everyone in your company followed a disciplined approach to cost reduction? What would it look like? How can it be done? With smart cost management, two powerful strategies-target costing and value engineering, will get you well on your way. You will find both strategies included in this comprehensive book, the first in a series which is guaranteed to increase your profits. Cost management must start at the design stage to be effective. As much as 90-95 percent of a product's costs are designed in and cannot be avoided without redesigning. That is why effective cost management programs focus on manufacturing and design. The primary cost management method to control cost during design is a combination of target costing and value engineering. These strategies will help accounting professionals ensure that the products launched by their company are successful, creating added value for the company as well as the customer.

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:Identify the cost at which your product must be manufactured at if it is to earn its profit margin at its expected target selling price.Break the target cost down to its component level and have your suppliers find ways to deliver the components they sell you at the set target prices while still making adequate returns.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.)

Executive SummaryHow Firms Compete Using the Confrontation StrategyThe Role of Cost Management in Confrontation StrategyThe Research ProjectAn Overview of Target Costing and Value EngineeringMarket-Driven CostingProduct-Level CostingValue EngineeringComponent-Level Target CostingFactors That Influence the Target Costing ProcessTarget Costing and Value Engineering in ActionLessons for AdoptersCase StudiesToyota Motor CorporationKomatsu, Ltd.Olympus Optical Company, Ltd: Cost ManagementSony CorporationTopcon CorporationIsuzu Motors, Ltd