Design to Cost (DtC) and Target Costing (TC) are methodologies
with associated tools for achieving the objectives of an affordable product
or service offering based on a defined price and profit margin. Also known
as Design for Cost(DfC) and Target Costing (TC) it defines a target cost
to be achieved during the design and development of a product or service
and directs focus on the product cost during product development.
In many companies product cost or life-cycle costs are
an afterthought or considered too late in the development cycle. The price
of the product is based on cost plus a margin and marketing effort is
focused on technology, style and performance. This approach may be acceptable
in some markets and with some products but ultimately competition will
force attention on the product cost. Product cost becomes more important
in situations where the technology or style (aesthetics) of a product
matures or stabilises so that competition is increasingly based on price
or when affordability is the customer's primary concern.
However, DtC is not just about minimising costs. Understanding Value and
its relationship to Price and Functionality is also important so that
opportunities to enhance the customer value proposition are not overlooked.
The guiding principles include:
Understanding, value, price and functionality
Understanding, analysing and using market information and Voices of Customers to determine needs (WHATs)
Establishment of a target cost
Avoiding ‘over design’
Cost Accounting methods to enable early use of product cost models and understanding of key cost drivers
Analysis of functions and their relationship to Elements ( Assemblies, parts, components)
Allocation of target cost to elements of the product
Willingness to use creativity to investigate alternative implementations of the product, functions or elements
For physical products the use of DFX tools such as Design
for Manufacturability (DFM) and Design for assembly (DFA)
Key Metrics (e.g. Target Cost, forecast volumes etc.) monitoring during Development
The management of product cost begins at the product concept
stage. Decisions made early in the development phase have a huge impact
on the life-cycle costs and once the design has been established there
is usually little scope for cost reduction. Traditionally with cost as
an afterthought the methodologies of Value Engineering/Value Analysis
have been used to try to reduce manufacturing and life-cycle costs. DtC
incorporates the principles of VA/VE but extends the methodologies to
earlier in the development cycle and integrates it with other tools and
methodologies.
For example DtC (or Design for Cost - DfC) is one of the important DFX
tools associated with Design for Six Sigma (DFSS). Other DFX tools such
DFA and DFSS tools such as QFD can therefore be used to investigate cost
reduction and value improvement opportunities based on customer requirements.
Framework,
Roadmap or Processes
We are experienced in adapting and applying the Design for Cost
(DtC) and Target Costing process, methods and tools for a client's specific
situation using a variety of implementation programmes and a database
of tools.
Toolkits:
Our approach installs an advanced set of tools to help achieve
improvements and results. We assemble these tools into a toolkit for for
a client's specific situation. Examples of tools include:
Value Proposition and Function/Price Positioning
Target Cost Demand Chain Worksheet
pQFD ( and Voice of Customer Table)
Convergence Matrix
Product Target Cost Model
Functions
Proposition Function Analysis System Technique (PFAST)
Function Cost Analyser
Target Cost Analyser
DFX
Software
Packages and Templates
Many of the tools are provided with Excel based software packages
or templates to facilitate practical use and ease of learning.
Implementation
Programme
Each programme is tailored to the client's situation, but typically
comprises the following deliverables: tailoring of toolkits, delivery
of facilitated workshops and software.
A typical programme comprises:
Agreement of
programme deliverables
Tailoring of guidelines, toolkit and software for client's specific project(s)
Facilitated workshops, 1:1 and 1:n coaching
Off-line telephone and e-mail support
Skills transfer to key individuals or training programme.
Free
Proposal
We can provide a free proposal, including programme outline with costing,
to meet your requirements - please contact us.
We can also provide a formal in house training programme on the above
topic, tailored to your specific needs. For more details click below:
Design
to Cost Training Workshop
Six
Sigma Product Development Management training programme
For information relating to allied topics, click on the links below
New
Product Introduction (NPI) or New Product Development (NPD)
Product
Definition (PD) and pragmatic Quality Function Deployment (pQFD)
Product Marketing and Management
Time
to Market Control and Compression (TtMCC)
Product
Innovation with Market, Technology and Process Innovation
Product
Development Training Course Workshop
Product
Development, Marketing and Management Software Applications
Time
to Market Product Development Healthcheck Assessment Audit
