1st Edition

Target Cost Management The Ladder to Global Survival and Success

By Jim Rains Copyright 2011
    229 Pages 41 B/W Illustrations
    by CRC Press

    With a proven track record for helping companies achieve critical cost reductions without sacrificing customer satisfaction, target costing provides managers and executives with the tools to survive and prosper in today’s increasingly competitive market—without raising prices on customers.

    Target Cost Management: The Ladder to Global Survival and Success details the preliminary steps required for a company to institutionalize target costing and the two necessary ingredients of target costing—proper organizational structure and cost tables. It describes and illustrates the interrelationships of the major techniques, tools, and methodologies needed to achieve the ultimate success.

    Jim Rains shares powerful insights harvested during his two decades of studying and benchmarking target costing for leading Japanese corporations including Toyota, Nissan, and Canon. Supplying the understanding and the tools to achieve critical cost reductions while maintaining and even improving customer satisfaction, this book explains the steps needed to reap the rewards of constant, consistent, acceptable, and predictable levels of profitability.

    The Ladder
    Rung 1
    Rung 2
    Rung 3
    Rung 4
    Rung 5
    Rung 6
    Rung 7
    Rungs 8 to 10

    The Rails of the Ladder
    Corporate Strategy
    Focus on Long-Term Profit Goals and Objectives
    Customer Focus
    Respect for Humanity/Employees
    Respect for the Environment
    Leadership

    Basic Concept of Target Costing
    What Are the Characteristics of Strong Enterprises?
    Roots of Target Costing
    Target Costing Becomes Comprehensive Target Costing
    Profit vs. Profit Margin
    Cost Management
    Cost Visibility
    Engineering Change Requests
    Survival Triplet
    Cultural Differences

    Does Your Firm Really Need to Do Target Costing?
    Is Target Costing for My Company?

    Getting Started on the Target Costing Journey
    Myths of Target Costing
    Organizational Breadth
    Steps to Begin Target Costing
    Knowing What to Do
    Form Cost Planning Group
    Conduct Current State Assessment
    Mission and Vision Statement
    Employee Training
    The Process of Team Building
    Team Performance

    The Cost Planning/Cost Management Group

    What Is the Cost Planning Group?
    Mission of Cost Planning Group

    What Costs Should You Establish Targets For?
    What Is Most Important: Quality, Function, or Price?
    Cost Management for Purchased Parts
    Where to Begin Collecting Cost Information

    The Development of Cost Tables
    Shift in Financial Thinking
    Three Major Requirements for Cost Tables
    Cost Table Sophistication
    Material Cost Table Development
    Direct Conversion Cost Tables
    Product Development Cost Tables
    Cost Tables by Process

    How to Set the Target Cost
    Subtraction Method
    Addition Method
    Setting Target Costs by Function
    Contingency Cost Allocation
    Special Situations
    Exceeding the Target Cost
    Allocation of the Target Cost
    Advanced Applications of Target Costing Concepts

    Alpha Brain
    Alpha Brain Background
    The Alpha Brain System: An Example
    The Model Factory
    Metal-Forming Factory
    Summary

    Benchmarking Japanese Companies

    Isuzu (1999, 2003, 2008)
    Zexel Corporation (1999)
    General Information
    Machining Center
    Cost and Value Engineering Discussion
    Toyota Motomachi Vehicle Assembly Plant (1999, 2005)
    Manufacturing Philosophy
    Assembly Process
    Material Delivery
    Quality Andon
    Toyota (2005)
    Aisen Seiki (1999)
    Hitachi Machinery Construction Company (2003)
    Society of Japanese Value Engineering (SJVE)
    Omron (2005)
    Denso (2005)
    Nissan (2006)
    Canon (2006, 2008)

    Each chapter concludes with a Summary

    Biography

    Mr. Rains has over 30 years of value engineering (VE) experience. During this time he has facilitated over 750 teams in VE, lean manufacturing, lean engineering, and competitive teardown workshops. For the past 15 years he has studied target costing from Japanese experts and believes this vital management philosophy leads to constant and consistent levels of corporate profitability. Mr. Rains is a certified value specialist (CVS) and has led numerous international corporations, architectural/engineering firms, and U.S. government DOD installations to successful results. VE studies have included product design, process improvement, procedures, weight reduction, quality improvement, organization effectiveness improvement, product development, process lead time,productivity, and throughput improvements. He has worked in many types of industries, including oil and gas companies, and with A/E firms to improve building designs and associated expenses. His VE and lean efforts have been exposed to a global network, including workshops in Austria, Australia, China, England, France, Germany, Hong Kong, Korea, Kuwait, Mexico, Qatar, Saudi Arabia, Sweden, United Arab Emirates, and the United States. Techniques and tools used in his workshops include the value engineering job plan, quality function deployment, voice of the customer, design for manufacturability/design for assembly (DFM/DFA), function analysis, creativity techniques, paired comparison, idea selection matrix, synchronous thinking, elimination of waste, and team building. Many of these workshops are SAVE International Certified Module I Workshops that just in the past four years have led to over 300 people becoming associate value specialists (AVSs) certified in value engineering. During this time he has been an advisor to three certified value specialists (CVSs). Since 1999 Jim has written and presented 13 papers that relate to VE at conferences around the globe. Jim‘s lean

    This is the tool that links product development to lean manufacturing and supply chain management. Target costing is one of the hidden treasures of companies like Toyota and Honda. Cost is not something you get when you add up the parts, it is an intentional criterion for design. We are very fortunate that Jim Rains is bringing this precious information to us all.
    —Jeffrey K. Liker, Ph.D., Author of The Toyota Way

    For companies to be great they need target costing. Target costing is essential to understand and manage cost and to reap high levels of profit. It is used by most great companies in Japan. Target costing in conjunction with value engineering is necessary to maintain consistent levels of profitability. This book's concept of climbing a ladder to reach target costing and requiring all the elements on each rung to be in and remain in place during the climb is essential to success.
    —Masayasu Tanaka, Ph.D., Professor, Graduate School of Business and Management, Mejiro University; Professor Emeritus, Tokyo University of Science; and Doctor of Cost & Profit Engineering, CVS, FSAVE

    …a must read for every business executive interested in global success. His extensive knowledge of Japanese productivity processes including the relationship between value engineering and target costing is evident in the book. This book from a respected world leader in value engineering provides the inspiration and details on how to incorporate target costing in your organization.
    —Don J. Gerhardt, Ph.D., Former Director of Value Engineering, Ingersoll-Rand; and President, Gerhardt Engineering