1st Edition
Target Cost Management The Ladder to Global Survival and Success
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 WayFor 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