Target Costing Process Galorath Estimation · PDF fileTarget Costing Process Galorath...
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Transcript of Target Costing Process Galorath Estimation · PDF fileTarget Costing Process Galorath...
Goof Pruijsen, March 2009 6
Technologies involved
X-Ray generationHigh VoltageDetection/chip technologyElectronicsMechanicsMechatronicsSoftware (database, control, processing, networks)And much more …
Goof Pruijsen, March 2009 8
Content of this presentation
• Why Target Costing?• Cost Monitoring• Cost Estimation Purchasing tool or more?• Some Examples of Cost Reduction
using Cost Estimation• Cost Roadmapping• Conditions to make it work• About: Book
Goof Pruijsen, March 2009 10
Influences on cost in the PCP• ‘Old’ process
Concept phase Development phase Production phase
12
3 45 6
Influence on CostInvolvement supplier (knowledge) too lateNo real targets
available
Target $at project start
Designed in CostsToo much
& Too late
Focus:Technical Feasibility
Selling Price
Margin: Cost Plus
Goof Pruijsen, March 2009 11
Target Costing, the process• Step 1: • Step 2:• Step 3:
Market price
Desired marginIn relation to
Total Cost of Ownership
Allowable cost
STEP 1
Market-driven costing is used to establish allowable cost
Value Engineering + Design-in-Workshops
Achievable target cost
STEP 2
New Current cost
ExistingFunc.
NewFunc.
FrozenSpec.
Establish achievable product cost (Value Engineering & ESI)
STEP 3
$(F1)
$(F2)
$(F3)
$(F..)
$(Fn)
Monitor drifting costsThroughout the project
Set targets for every component in the product (prioritize & budgetize)
Goof Pruijsen, March 2009 12
PCP including Target Costing + Early Supplier Involvement
Concept phase Development phase Production phase
12
3 45 6
Target Costing proces Real
targets
Target $In Projectbrief
Realized @ target cost & in time
Focus:Technical and Economical Feasibility
Continuously measure and
control drifting cost
ESI:Design-inWorkshops
Cost Workshops
Starting point for organization to think
and achieve Cost Price Reduction
with or without suppliers
Mind set: Spin off to projects
STEP 1
STEP 2STEP 3
Use Should Cost Calculations
Goof Pruijsen, March 2009 13
Project examples: Cost monitoring
Cost Monitoring example
Cost Monitoring Process:
1. Target Cost
2. Budget per building block
3. Monthly Estimates
4. Delta Actions
5. Management report
Goof Pruijsen, March 2009 14
Two Focus areas for Estimation :Development and Purchasing
Concept phase Development phase Production phase
12
3 45 6
Target $In Projectbrief
Continuouslymeasure and
controldrifting cost
ESI:Design-inWorkshops
RegularProduction /
RepeatPurchases
Influence on Cost
Involvement of
Cost Estimation= Tool +
Expert
Goof Pruijsen, March 2009 15
Project examples: Early Estimating supports Cost monitoring
Cost Monitoring example
Cost Monitoring Process:
1. Target Cost
2. Budget per building block
3. Monthly Estimates
4. Delta Actions
5. Management report
Goof Pruijsen, March 2009 16
Examples early estimates in project
1. Composite341.33
Total Tooling 859Labour 121
2. Injection Moulding50.86Total Tooling 23.514Labour 15
3. Thermoform68.16Total Tooling 39,111Labour 5
4. Poly Urethane130.28
Total Tooling 43.070Labour 5
• Cover alternatives
Goof Pruijsen, March 2009 17
Case example Should Cost CalculationNo result from negotation with monopolistRecipy: Built an absolute Cost Reference (instead of comparing offers from
your suppliers)• Use Technical Cost Engineers
– Also brings extra benefits: determine ‘golden specs’ and other cost drivers, make-ability.
• And/Or other means to benchmark prices:– SEER, Anklesaria method
• Cooperate with the supplier via Cost Workshops
050
100150200250300350400450500
Est. CostEngineer
IndustryAverage
Price we pay
Profit
Overhead
MOH
Labour
BOM
Goof Pruijsen, March 2009 18
Cost Roadmapping, an example
•Predict Product price, 5 years ahead (includes price erosion)
•Subtract required Margin & Organizational Costs
•Transform material budget into Cost Roadmaps
X-module Cost Roadmap
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
Presen
t Cos
t
Expec
ted C
ost w
k17
Target
Cost 2
004
Targe
t Cos
t 200
5Ta
rget C
ost 2
006
Target
Cost 2
007
Target
Cost 2
008
PC's + infra
Labour costs
Miscelaneous
F parts
H module
Board 5
Board 4
Board 3
Board 2
Board 1
P-Box
Cabinet
Goof Pruijsen, March 2009 19
Results from Cost Engineering
• Low product cost price, both from design point of view as from price negotiation point of view.
• Insight in cost structure and transparency in cost down scenarios. High predictability with respect to cost down projection and realistic cost down roadmaps.
• Cost price reduction in a range of 10 – 50%
• If the cost engineering is involved timely …
Goof Pruijsen, March 2009 20
Conditions to make Cost Estimation work
• And convincing the organization
= Tool +
Expert
Goof Pruijsen, March 2009 21
Value of a Cost Engineer in gold?
• Gold price (March 18th) = $ 868 / ounce• = $ 27.909 / kg• Cost engineer average weight = 75 kg. • Required saving = $ 2,093,247
• We do > 2 Mln Euro savings per year per cost engineer
Goof Pruijsen, March 2009 22
My book about Target Costing / Value Analysis
• How to apply Target Costing
• How to apply Value Analysis
• How to involve suppliers
How to order: www.orenda.nl