Key principles of effective product cost management

11/15/2012

The benefits of a systematic product cost management (PCM) program are significant, yet many manufacturers struggle to implement these initiatives effectively. This article discusses some key principles to guide and execute an effective PCM program for maximum impact.

Many people and departments within an organization impact product cost:

• An engineering team decides on a specific design, but there are multiple alternatives that meet the same form, fit, and functional requirements. Each dictates a different cost.
• A sourcing team pays to produce a specific design, but there are multiple potential costs for manufacturing the design. Manufacturing costs are often negotiable and depend on plant cost structure, capabilities, and process control.
• A manufacturing team selects one way to produce a specific design and estimates a ballpark cost, but there may be several more cost-effective ways to manufacture the same design.....
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