Target Costing – The market-oriented Cost Management
Target Costing is essential in Strategic Cost Management. It is used when the budgeting and planning of projects, as well as the requirements of the market and those of the company, have to be fulfilled. This is the only way for you to be able to focus on the right product functions and components right from the start of the project planning phase and thus economically manage the value added of your company.
Cost management in projects
In traditional Cost Planning, either project managers define the target costs based on the internally calculated bottom-up cost, or management sets the value of the target cost for new developments as a derivation of historical cost information, or as a percentage of financial figures such as revenue and profit for Research and Development (R & D).
Due to the fast-paced technological progress, changing market requirements receive little attention. The industry's pressure to act in order to remain competitive is high: that is why we at POLARIXPARTNER pursue the approach of market-oriented Target Costing. This is where market and customer requirements are placed at the forefront. In Target Costing, we define the budget of projects so that the customer is satisfied with the selling price and the company is satisfied with the profit earned.
Target Cost Management through Value Analysis, Target Costing and Design to Cost
The most important consideration in Target Costing is to conduct planning processes with a business management perspective and in a market-oriented fashion. Value Analysis is used to examine processes around the product and thus reduce manufacturing costs. Such Value Analysis also includes the customer's own view of the product.
The majority of manufacturing costs are determined by product management and, above all, development. Design to Cost (DtC) effectively controls target costs in advance. It starts with early product development to secure the company's profit and cost goals throughout the product life cycle. In the case of a product's components, the Design to Cost process often finds more cost-effective options which are considered of equal value by the customer.
With POLARIXPARTNER Insights, we offer you independent evaluations of trends and developments. In our Insights, we cover the latest topics and trends and share our point of view. For example, would you like to know where the future of your industry is going, and how to make the most out of upcoming market opportunities? We provide you with forward-looking white papers, publications and studies! Whether it's the automotive, aerospace, medical technology or pharmaceutical industry, mechanical engineering or plant construction – we have the inside knowledge to help you with your strategic development.