Thursday, January 6, 2022

Target Costing and Industrial Engineering



Target costing is cost estimation method to set cost targets for a product and its components in relation to the target price set by the company for the product as an objective.

Target cost method requires cost reduction methodology to achieve the set  target costs. Hence industrial engineers are called to assist the new product development teams to support cost reduction. Industrial engineers have to the knowledge bases containing cost information for various elements of products and processes. Hence they will be able to locate lower cost alternatives to any design idea. They can investigate any competitor design that is giving better cost effectiveness or productivity.

Industrial engineering tools were used by the Toyota managers in target costing exercises. Taiichi Ohno specifically mentioned the role of Industrial Engineering in improving the profitability of Toyota Motors by reducing costs.

We can say industrial engineering finds an avenue for its services, when company implements target cost methodology for its new products.

Added on 26 July 2018

Now, I developed the term "Product Industrial Engineering" to indicate the redesign of products  carried out by industrial engineering to reduce the cost of production and distribution of the product. While "value engineering" is the first redesign technique that focused on cost reduction of a product by redesigning, we now have more tools and industrial engineers can contribute to the target costing based new product introductions as well as annual budgets.

Industrial engineers are committed to total cost industrial engineering. Total cost industrial engineering is application of engineering and engineering activity related management to reduce the cost of manufacture and distribution of a company's product and service portfolio.


Product Industrial Engineering

Study Materials




Product Industrial Engineering

Value Engineering - Introduction

Value Analysis and Engineering Techniques

Value Analysis: Approach and Job Plan

Knowledge Required for Value Engineering Application and Practice

Functional Analysis Systems Technique (FAST) - Value Engineering Method

Value Engineering - Examples, Cases and Benefits

Value Engineering in Construction - Structures, Roads, Bridges

Value Engineering at the Design and Development Stage - Tata Nano Example

Low Cost Materials and Processes - Information Board  - Database for Industrial Engineering and Value Engineering

Value Engineering - Bulletin - Information Board



Lean Product Development - Low Waste Product Development - Efficient Product Development



Design for Manufacturing

Design for Assembly



Cost Reduction/Productivity Improvement Methods of Industrial Engineering

Methods efficiency engineering and the related operation analysis examine proposed manufacturing processes and eliminate wastes or inefficiencies.

Motion economy principles based design provides for the best motion pattern that minimizes human effort.

Layout efficiency improvement takes care of layout related issues.

Value engineering takes a product and component design analysis approach to reduce costs.

Operations research optimizes various parameters subject to the given constraints.


Implementing Target Costing - IMA Note
IE techniques  DFMA and Value Engineering are included in the note the achieve cost reduction during the design process.
http://www.imanet.org/docs/default-source/thought_leadership/management_control_systems/implementing_target_costing.pdf

Tools and Techniques for Implementing Target Costing - IMA



Current Status and Challenges of Target Costing in Japanese Major Corporations
2006 Article
Masayasu Tanaka,Masao Okuhara, Masao Ariga
http://www.value-eng.org/knowledge_bank/attachments/200631.pdf


New Bibliography added on 26 July 2018

Why NYU Tandon for Industrial Engineering?

Industrial Engineers complete their programs well versed in the theories and practical application of lean manufacturing, target costing, and design for manufacturability. Our program establishes a strong foundation in the ability to create engineering processes and systems that improve quality and productivity while eliminating the waste of labor, time, and resources.
http://archive.engineering.nyu.edu/academics/online/masters/industrial-engineering (Accessed on 26 July 2018)

Study on the Strategies of Target Cost Management in the Supply Chain of Aeronautic Complex Product.
Hang-hang Chen and Li-xin Pan
2016
https://books.google.co.in/books?id=sj-FCwAAQBAJ&pg=PA502#v=onepage&q&f=false

Using Target Costing to Enhance the Operating Profit
https://books.google.co.in/books?id=-QW5CgAAQBAJ&pg=PA938#v=onepage&q&f=false
2016
Article: Research of Implementation Mode of Strategic Management Accounting.
Yang-fang Gao et al.

B. Gopalakrishnan, A. Kokatnur, D.P. Gupta, (2007) "Design and development of a target‐costing system for turning operation", Journal of Manufacturing Technology Management, Vol. 18 Issue: 2, pp.217-238,
https://www.emeraldinsight.com/doi/abs/10.1108/17410380710722917


Target Costing and Value Engineering
Robin Cooper, Regine Slagmulder
 1997 - Productivity Press
Published May 31, 1997
Reference - 359 Pages
https://www.crcpress.com/Target-Costing-and-Value-Engineering/Cooper-Slagmulder/p/book/9781563271724

May 1993
New product costing, Japanese style. (CPA in Industry )
By Margaret Lgagne and Richard Discenza
http://archives.cpajournal.com/old/14345315.htm



Target Costing, Industrial Engineering and Value Engineering Consultants

EFS Consulting, Vienna
https://efs.consulting/en/target-cost-and-cost-down/


Updated 26 July 2019,   26 July 2018,  23 July 2016, 28 November 2013

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