If one considers the environment facing Global Manufacturers today, there are a variety of major economic issues impacting profitability:
- Rising Energy Costs & Labor Costs
- Commodity Price Fluctuations, and
- Tougher Government Regulations
Even big, highly sophisticated companies are struggling to get a handle on these types of issues.
In response to these complex challenges, we have observed companies trying to implement cost management goals and programs that are stretching across the entire organization. However, in nearly every single company we visit, there is no CONSISTENCY, no common set of processes and tools for calculating cost and managing cost data across the entire Product Team:
- For years Sourcing teams have had annual targets to reduce product costs by 5 or 6%, but are given no real tools to calculate what a product “should cost”,
- Finance or Cost Specialists are estimating a standard cost long after most of the key design decisions have been baked into the product. Furthermore, this cost data is being calculated by different people and stored in disparate, distributed systems creating huge consistency and data access problems.
- Designers and Engineers are starting to be asked to consider cost as a variable in their new product initiatives, but they also have no tools to quickly assess the impact of decisions they are making every day.
- And finally, you’ve got the Executive Management team. They want answers to questions like: will our new product launch at or over target cost? I can only take one of three new product initiatives into full production, which one will be most profitable? And there are really no good answers to those kinds of questions.
At aPriori, our goal is to create a common cost vocabulary across the enterprise by providing a unified, CONSISTENT approach to costing that institutionalizes an understanding of manufacturing cost drivers and arms individuals with cost and manufacturing data to support profitable decision making.
To support our vision we are looking at the needs of individuals and the hand offs between departments in an operational solution. Not only broadening access to cost, but also pushing cost awareness earlier in a development cycle to provide:
- Executives and Program Managers with continual visibility to cost status of a given product or project so that they can understand where best to direct the team’s efforts,
- Designers and Engineers with alerts to components potentially over target and the ability to assess the cost impact of their designs and explore more cost-effective alternatives early in the product lifecycle,
- Manufacturing Engineers with the ability to provide guidance and collaborate with Designersto improve product manufacturability and drive innovation; Manufacturing Engineers can also refine the manufacturing approach/estimate to create an internal quote as the component design matures,
- Cost Engineering with a solution to optimize a larger volume of parts, complete more robust analysis and easily re-cost as components or economic data changes, enabling them to collaborate and provide guidance more effectively to sourcing and engineering. Similar to how QA teams enabled departments across their business to reduce and resolve defects through Six Sigma, Enterprise Product Cost Management provides Cost Engineering a solution to amplify their cost knowledge across the organization or for organizations that do not have Cost Engineering to increase their corporate cost competency,
- Sourcing with should-costs to find outliers in current product spend and supplier quotes, analyze make vs. buy situations and support supplier negotiations.
The end result of CONSISTENT Enterprise Product Cost Management process and technology deployed across your organization would include:
- Faster time to market
- Increased product profitability
- Increased product innovation
For more information about how aPriori can help deploy a CONSISTENT cost culture across your enterprise, contact us at ProductCost@apriori.com to arrange for a private demonstration of our technology, and learn about how our world class Professional Services can help you define a Product Cost Management strategy that makes you more cost competitive than anyone else in your industry.