Types of Costs TOTAL COST Material Production costs

Types of Costs TOTAL COST Material Production costs overheads costs Material Costs Production overheads Production Costs Manufacturing Costs Special Administrative Distribution Production costs Costs costs Administrative and Distribution Costs

Team Involvement This team decides on a particular This team opts for certain This team determines a concrete design. There could also be an manufacturing products. The cost is way to manufacture the product alternative with the same functions often negotiable and there and estimates the cost. It is & requirements, which is less usually several sourcing possible for it to be cost-effective. expensive. alternatives. Engineering Team Procurement Team Production Team

Total Cost of a Product Utilization Costs Operating Costs Training Maintenance, Repair Energy Disposal Costs Product Planning, Development, Procurement & Manufacturing Product cost management of the life cycle cost Disposal, Dismantling Recycling, Deinstallation Sales/ Revenue

Cost Factors in the Development Phase Planning Phase Conception Phase Designing Phase Developing Phase Customer Requirements Product Functions Product Structure Material Product Specifications Functional Structure Number of Parts Surface Quality Product Functions Solution Principle Components Allowances Meaning of Functions Purchase Standardization, Acquisition Parts Standardization Permissible Target Costs Purchase Life Span Planned Variations Continuous monitoring of the development process and cost adjustment

Savings According to Project Phases 30 -40% 01 -10% 20 -30% DEVELOPMENT MANUFACTURING AFTER SALES & SERVICE Cost Reduction Potential

METHODS Different Systems Design to Cost: Cost Influence Design to Cost: Elements Design to Cost: Cost Influence Target Cost High Design to Cost: QFD Function Finance Cost Influence Customer value Fit Form Low Company profit High

METHODS Different Systems Design to Cost: Quality Function Deployment (QFD) Design to Cost: Elements Design to Cost: Cost Influence Correlation Matrix: Design to Cost: QFD options for the company Design Requirements: How well does the company take the customers’ wishes into consideration in the production VOC (voice of the customer) Relationship Matrix: What do the How well are the customer needs met? customers need? Importance Benchmarking

Traditional Cost Management vs. Target Costing Traditional Product Cost Management Market Research Product-Specific Features Design Development Material Price Cost Planning/ Calculation Costs too high. Back to the design phase Design Production Development Material Price Target Costing Cost Planning/ Calculation Product-Specific Features Market Research Production

STUDY RESULTS Cost Savings Programs Which of the following statements, in your opinion, applies to cost savings programs of your company? Not required, since we dictate prices in our segment Verkauf 8% Planning and definition of actions 20% 17% Aware of strategic importance and achieved sustainable success 19% 17% Meet the targeted savings Necessary to remain competitive 19% Ensure profitability and sustained corporate growth

STUDY RESULTS Which of the following statements, in Cost Saving Program by Company Size your opinion, applies to cost savings programs of your company? (5 = absolutely, 1 = not at all) (107 companies surveyed) Not required since we dictate prices in our segment Aware of strategic importance & achieved sustainable success Company Size Meet the targeted savings > 10, 000 1, 000 – 10, 000 Ensure profitability & sustained corporate growth < 1, 000 Necessary to remain competitive Planning and defining actions 0 0, 5 1 1, 5 2 2, 5 3 3, 5 4 4, 5

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