Target Costing and Value Engineering

What would happen if everyone in your company followed a disciplined approach to cost reduction? Go ahead -- imagine it. What would it look like? How can it be done?

The answer -- smart cost management.

Effective cost management must start at the design stage. As much as 90-95% of a product's costs are added in the design process. That is why effective cost management programs focus on design and manufacturing. The primary cost management method to control cost during design is a combination of target costing and value engineering.

Target Costing Objectives:

Identify the cost at which your product must be manufactured at if it is to earn its profit margin at its expected target selling price.
Break the target cost down to its component level and have your suppliers find ways to deliver the components they sell you at the set target prices while still making adequate returns.
Value Engineering:

The connection to function. An organized effort and team based approach to analyze the functions of goods and services that the design stage, and find ways to achieve those functions in a manner that allows the firm to meet its target costs.

The result: Added value for your company (development costs on-line with added value for your company; development costs on-line with selling prices) and added value for your customer (higher quality products that meet, possibly even exceed, customer expectations.)

Foreword
Preface to the Series
Preface
Acknowledgments
About The Authors
About The Sponsors
Figures, Tables, Exhibits
Executive Summary

Part I : Confrontational Cost Management
Chapter 1 : How Firms Compete Using The Confrontation Strategy
Chapter 2 : The Role of Cost Management in Confrontation Strategy
Chapter 3 : The Research Project

Part II : Target Costing and Value Engineering
Chapter 4 : An Overview of Target Costing and Value Engineering
Chapter 5 : Market-Driven Costing
Chapter 6 : Product-Level Target Costing
Chapter 7 : Value Engineering
Chapter 8 : Component-Level Target Costing
Chapter 9 : Factors That Influence the Target Costing Process
Chapter 10 : Target Costing and Value Engineering in Action
Chapter 11 : Lessons for Adopters

Part III : The Cases
Chapter 12 : Nissan Motor Company, Ltd.
Chapter 13 : Toyota Motor Corporation
Chapter 14 : Komatsu, Ltd.
Chapter 15 : Olympus Optical Company, Ltd. : Cost Management
Chapter 16 : Sony Corporation : The Walkman Line
Chapter 17 : Topcon Corporation
Chapter 18 : Isuzu Motors, Ltd.

Appendix : Company Descripations
Glossary of Terms
Selected Bibliography and References
Index