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Product Cost Management Tools: Past, Present, and Future

 | August 31, 2023

Key Takeaways:

  • Product cost management tools evolved from manual spreadsheets to advanced software
  • The shift to advanced product cost management solutions enables precise, informed, and rapid decision-making

The Full Article:

Product cost management tools (PCM) provide extensive cost modeling estimates to help manufacturers design products economically to increase profitability. PCM vendors have different approaches for estimating costs, managing a bill of materials (BOM), generating reports, and evaluating cost-reduction scenarios with 3D CAD models.

Due to the increasing complexity of product manufacturing, design teams are trading their spreadsheets and limited PCM tools with automated cost estimation software. This transition enables companies to meet requirements for both speed and accuracy. Let’s examine the evolution, current capabilities, and features propelling PCM software into the future.

The Past: Early Days of Product Cost Management Tools and Spend Analysis

The emergence of computer-based spreadsheets in the 1970s simplified product cost management and analysis, even for less technically skilled cost engineers. A decade later, Microsoft entered the computer spreadsheet market by introducing its widely adopted tool, Excel.

Approximately 70% of organizations today use spreadsheets to compare and track the actual costs of new product designs. While they are still utilized, spreadsheet tools have notable drawbacks and limitations, such as:

  • Lack of scalability. Spreadsheets cannot manage a large amount of complex cost data as products and costs increase. They also require the expertise of cost engineers to populate and understand them. This can lead to bottlenecks and time-to-market (TTM) delays in product development.
  • Prone to human error. It is not uncommon for users to manually enter incorrect data into a spreadsheet file. This often results in inaccurate product cost calculations. Maintaining manual spreadsheets is also a complex, cumbersome, and time-consuming endeavor for internal product development teams.
  • Limited team collaboration. Cross-functional teams may struggle to track changes and collaborate with siloed stakeholders in real time. Managing product cost estimates with spreadsheets can be challenging due to their limited and basic collaboration capabilities.

These spreadsheet constraints have increased the demand for advanced PCM software across sectors within discrete manufacturing.

The Present: Stay Competitive With Product Cost Management Software

Today’s innovators can employ PCM software to reduce design costs and accelerate TTM. The software provides a precise, automated solution to capture real-time cost data and facilitate informed decision-making. PCM software is also highly scalable to meet the needs of a growing manufacturing organization.

McKinsey Cleansheet, Siemens Teamcenter, and aPriori Manufacturing Insights are among the most widely used PCM software solutions. Below is a high-level overview of each solution and their respective capabilities:

  • McKinsey Cleansheet. McKinsey’s primary offering is expert consulting services to help manufacturers assess their product’s cost structure and capture savings. The Cleansheet PCM solution leverages cost model libraries and databases to generate should cost estimates, which supplements the company’s advisory services.
  • Siemens Teamcenter. The company’s PCM solution uses a more traditional, bottom-up approach to deliver should cost estimates. Further, Teamcenter utilizes production process models to assess and calculate the costs of products and tools.
  • aPriori Manufacturing Insights. aPriori’s automated software utilizes 3D CAD model data to provide real-time cost insights for parts and sub-assemblies. The aPriori platform also provides configurable digital factories. These virtual factories contain real-world Regional Data Libraries (RDLs) and physics-based manufacturing process models to generate precise estimates rapidly. Global manufacturers rely on aPriori to make informed decisions and achieve significant cost savings today and in the future.

Integrate Current Enterprise Systems With PCM Software for Precise Cost Estimates

Companies can seamlessly integrate their enterprise management systems—including ERP, CAD, and PLM—with PCM software to achieve robust cost analysis. The integration allows teams to draw from enterprise metrics and insights to make rapid data-driven decisions.

The PCM software integration goes beyond product costing by extracting data from enterprise management systems. It also provides insight into sustainability, manufacturability, and supply chain risks simultaneously, facilitating better decision-making to improve the bottom line.

The Future: Increased Automation and Intelligence in Cost Management

Automation and intelligence will significantly shape the future of PCM analysis and product development operations. Global manufacturers can expect a consistent rise in the adoption of the following future-ready technologies:

  • Predictive analytics using AI and ML. Artificial Intelligence (AI) employs human-like cognition for tasks such as problem-solving and decision-making. AI technology utilizes machine learning (ML) algorithms to detect patterns and make precise predictions based on historical or large datasets. AI and ML technology are still evolving, as is their application to product cost management.
  • 3D CAD geometric intelligence. Teams can utilize platforms like aPriori to simulate and compare various production alternatives, even at the machine level. aPriori automatically extracts 3D CAD data to evaluate manufacturing feasibility, calculate cycle times, and determine material usage and tooling needs. 3D CAD data is essential for creating a digital factory that mirrors real-world machines, materials, processes, overhead rates, and more. This enables teams to make quick and informed decisions to meet cost, sustainability, and manufacturability targets.

The Impact of Expert Consulting Services on Product Cost Management

Product manufacturers can supplement their PCM efforts with expert advisory services from major firms like McKinsey and Boston Consulting Group (BCG). Due to iterative back-and-forth client discussions, consulting firms may take a long time to deliver estimates.

aPriori provides PCM software and expert consultants who have led product cost engineering teams at top global manufacturing companies. These experts train product manufacturers to use aPriori’s software to handle pressing challenges more quickly and effectively.

Collaborate Effectively and Improve Product Cost Management With aPriori

Product cost management tools have evolved from manual spreadsheets to advanced, real-time PCM software solutions like aPriori. aPriori integrates with enterprise systems to unlock extensive, actionable manufacturing data for the entire product development team.

Design, cost, and sourcing professionals can collaborate seamlessly to make precise, data-driven decisions while maintaining profitability in a dynamic industry.

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