Target costing as interim management approach
What target costing means to us:
Target costing is a process of cost engineering and goal achievement used from the early concept phase through to market launch. Important questions here include:
- How can the overall goal be deduced for a new development?
- How can the overall goal be broken down so that employees can take responsibility and work towards achieving this goal?
(If it were sufficient to simply define a goal and attempt to achieve it, then in so many cases budgets would not be overrun and deadlines missed). Rigor and consistency are important, however, by themselves, they will not lead to success without active cost management.
- How should target overruns be dealt with?
- What suitable means and methods are available to counteract these?
- How can effective cost management be operated?
Target costing is thus primarily a process of active product cost engineering and not a reactive cost reduction project in the sense of a ratio analysis proposal.
From experience we know that the procurement department in particular likes to request "give me a target!", meaning a target price for a specific scope of procurement. This request is legitimate, reasonable, and just as willingly accepted by us. However, this is not target costing, but rather a one-off action that is meant to respond to the legitimate question regarding the purchase value.
What we offer:
Do you successfully develop complex products in terms of announced launch date and target costs? Congratulations!
However, those who have dealt with the problem of escalating costs or even missing cost information in the product development process (PDP) will have noticed that method is lacking here. At the same time, however, they suspect that a purely theoretical approach will not get them where they want to be. Here we can provide specific practical experience gained, among other roles, as an interim manager with responsibility for the introduction and implementation of target costing with a commercial vehicle manufacturer.
(See the book: Norbert Starck Target Costing als Interim-Management-Ansatz (Target costing as an interim management method), ISBN: 978-3-00-043459-4, butterflymanager Verlag, 2013)