Design to Target Cost

The Basis for Successful Commercial Operation:

PRICE = TRUE Product Cost + ADDITION which reflects the VALUE to customer in a market place which may have competing products.

A Support Process is needed to monitor and control future manufacturing cost to a fixed target during the product introduction process.
Early cost estimates become quickly obsolete due to the constant dynamic change involved in the design process. Continuous Cost Drift is likely to occur unless the manufacturing and supply materials costs are constantly monitored and action taken to bring costs back to target.
Multi-disciplinary product introduction teams can quickly identify adverse variances due to either design decisions or the emergence of new facts, concentrating effort to attack problem sub-systems.

Target Setting and Early Estimating

A number of approaches to target setting can be applied, but they fall into two main categories:

The Top down approach forces a view of the market price to drive the cost of the product.
The Bottom up approach requires design, manufacturing and distribution concepts to be evaluated during the conceptual design stage.

Monitoring and Control

A cost model for each product sub-system, and for the manufacturing process system, should be created by the product introduction team who input any changes to the design and monitor the effect these have on the cost. Changes or facts which cause the cost to go above target focus team effort on that sub-system. Here methodologies such as Design for Manufacture and Assembly, and Manufacturing Systems Design, can be used as appropriate to redesign the sub-assembly or its manufacturing methods and bring the cost back to target.

The product assembly at each stage of the design process can be exploded into sub-assemblies and then into component parts with raw material, manufacturing process operations, logistics processes and work contents documented for each component.

The Manufacturing System Flow Chart

Listing each process operation involved.
Listing all labour requirements and the associated training.
Listing all machines.
Listing all control systems including change controls.
Listing floor areas and other overhead support services.
Listing standard work procedures.
Listing NVA activities.

In this way the COST of each activity in the whole manufacturing process system can be defined for consideration at the design stage and a total cost versus product volume chart constructed for the product for comparison with the target cost.

The manufacturing process flowchart with each process operation calibrated by cost then forms a best practice target cost control via:

Activity Based Costing (ABC)
Continuous Process Improvement (CPI)

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