Effective Product Globalization Requires Transparency to Costs

Rick Burke October 16, 2015

Manufacturers are struggling to efficiently deliver innovative products to customers around the world with different requirements and budgets.

To combat the escalating challenges of product globalization, manufacturers need to connect people across the product lifecycle with relevant views of product cost data – from sales to supplier, from concept to customer. This requires real-time transparency to product cost data, enabling manufacturers to avoid late stage design churn, deliver products to market faster, and offer more value to their customers for the same price.

Product Globalization is Challenging When Cost Data is Scattered

When design, sourcing and manufacturing work are occurring all around the world, the many different types of costs produced during the product development process, are often scattered throughout the organization, residing in a variety of enterprise and desktop systems. This makes it extremely difficult for design and sourcing teams that are not co-located to collaborate on cost management initiatives.  Further compounding the problem is the fact that these costs are dynamic, changing over time.

For example, cost of materials and purchased parts are highly dependent on unit volume – which could fluctuate depending upon availability of raw materials, shipping/logistic constraints and market demand.  This makes it difficult to access the cost data necessary to make important design, sourcing and manufacturing decisions.


A Single System to Consolidate, Generate & Organize Costs is Required

What is needed is to bring all product cost data together into one shared database accessible by everyone in the organization that has an impact on product cost. The system must consolidate all historical product cost data, enable the generation of cost data for new product designs, and organize the data into a hierarchical, fully cost Bill of Materials (BOM) that aligns with the product structure.

Finally, the system needs to be able to organize the data into different product cost rollups and scenarios, manage that data in-line with your product development process, and regularly generate new cost estimates that represent:

  • Design alternatives to study different feature/value tradeoffs
  • Sourcing alternatives to study the cost impact of sourcing parts from different regions or new suppliers, or
  • Manufacturing alternatives to gain an understanding of the potential impact of changing process routings or using different machines

These are the types of cost optimization studies that are possible throughout the product lifecycle with a single unified Enterprise Product Cost Management (EPCM) platform.

EPCM Enables a Cost Conscious Culture, Positively Impacting Profitability

In addition to connecting all of the data across the enterprise, an EPCM platform can also connect all the people across the product lifecycle to this data. The entire product development team, from the sales people on the front line to the most distant supplier – each one impacts product cost every day with the tradeoff decisions they make:

  • What if I make this product out of a lighter material?
  • What if I switch to a different supplier in Mexico?
  • What if we use a different routing in our plant?
  • Is our new product initiative meeting target cost?

With the right tools and processes in place, people throughout the organization would have the answers to these questions at their fingertips. They could attack cost at the point of origin, and route out cost early in the design process before it becomes expensive to fix mistakes.

In this type of environment, when people start including cost as part of their routine decision making process, a culture of cost consciousness slowly starts to emerge across the corporation, which can have a profound impact on the company’s overall profitability.

Want to Learn More?

Download our white paper, Implementing An Effective Product Cost Management Program.


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