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1、Cost Management 1992Introduction1Information In This ReportI - 1Period Planning- Establish Five Year PlanPER I- Establish Short-term PlanPER IICustomer Satisfaction/Market Research- Understand Customer Needs and WantsCS IProduct Planning- Establish New Product Development Plan and BudgetPP I- Propos
2、e Sales Volumes and Vehicle PricesPP II- Develop Product Concept/Development PlanPP III- Perform Profitability CheckPP IV- Conduct Basic Product PlanningPP VManufacturing and Investment Planning- Determine Capital Investment Targets and PlanMIP I- Plan Production System and Layout, and Finalize Equi
3、pmentand ToolingMIP IITarget Setting- Establish Vehicle Target CostTS I- Allocate Vehicle Cost Target to Vehicle SystemsTS II- Allocate System Costs to PartsTS IIICost Estimating - Estimate CostsCE I- Update Cost TablesCE IIProduct Design and Value Engineering- Conduct Value EngineeringPDVE I- Evalu
4、ate PrototypesPDVE IISupplier Interaction- Develop Supplier Relationships and Learn About Supplier TechnologySI I- Select Suppliers and Communicate RequirementsSI II- Evaluate Prototype Parts and Negotiate PricesSI III- Prepare for Mass ProductionSI IV- Reduce Supplier PricesSI VKaizen Costing and I
5、mprovements- Establish Kaizen Targets and BudgetsKC I- Set Standard Values for Labor and MaterialsKC II- Implement Kaizen Cost ImprovementsKC IIIDepartment Descriptions- CommitteesDD I- Corporate Planning DivisionDD II- Sales/Marketing DivisionDD III- Finance/Accounting DivisionDD IV- Engineering Pl
6、anning DivisionDD V- Design/Engineering DivisionDD VI- Production Engineering DivisionDD VII- Purchasing DivisionDD VIIICross-Functional Management and Policy DeploymentCFM - 1GlossaryG - 1Research ApproachRA - 1The initiative to better understand Japanese cost management practices was organized in
7、mid-1991, when results from Arthur Andersens seventh Automotive Trends survey were released. The study, which surveyed both U.S.- and Japanese-owned vehicle manufacturers and suppliers about various business practices within their companies, included questions about cost management practices. The re
8、sults indicated that Japanese-owned companies were generally achieving better results from their cost management processes than their U.S.-owned counterparts. Further, when the survey results were presented to various management groups in Japan, discussions added to the realization that Japanese cos
9、t management practices need to be understood by western companies.Research ApproachThe cost management benchmarking study began in September 1991. The effort focused on Japanese vehicle manufacturers and suppliers because, similar to the JIT production system, the cost planning system has its origin
10、s in the automotive industry and has spread to other Japanese industries. In addition, many companies recognize Toyota as having the best cost management system in the world.Between September 1991 and April 1992, the benchmarking team used numerous methods to understand the elements of the system, h
11、ow the elements relate to one another and how to implement elements. Primary information sources included: - Over 30 face-to-face interviews with Japanese-owned vehicle manufacturers and suppliers, conducted primarily in Japan.- Numerous discussions with Japanese professors and authors.- Ongoing par
12、ticipation in a cost management study group in Japan. The companies included in the study group, which includes Japanese companies recognized to be on the leading edge of cost management practices, often present case studies of their cost management practices.- Japanese articles, case studies and bo
13、oks which were translated into English.- A current status assessment survey of both U.S. and Japanese manufacturers and suppliers.Current Status AssessmentAs part of the benchmarking effort, the team conducted a current status assessment in which U.S.- and Japanese-owned companies were asked to prov
14、ide opinions about the effectiveness of various cost management practices within their own organizations. Participants in the current status assessment included:- Chrysler, Ford and General Motors in the U.S.- Toyota, Nissan and Honda in Japan- Eighty-seven U.S.-owned independent suppliers in the U.
15、S.- Nine Japanese-owned suppliers in JapanThe results confirmed the premise that current cost management practices of U.S.- and Japanese-owned companies are significantly different. Following are some results from the current status assessment:- All of the Japanese-owned companies say that Market Pr
16、ice - Target Profit = Target Cost is the thought process used in their cost planning system. In contrast, two of the three U.S. vehicle manufacturers and approximately two-thirds of the U.S. suppliers indicate that Cost + Profit = Price is their most prevalent thought process.- Although all of the v
17、ehicle manufacturers believe that value engineering is extremely important to reducing costs, only one U.S.-owned vehicle manufacturer says it is effectively using value engineering. All participants in Japan say their companies are effectively using value engineering.- All of the vehicle manufactur
18、ers believe that it is possible to accurately estimate at least 80% of a products final costs during concept development. (Interestingly, one Japanese vehicle manufacturer told the benchmarking team that accurately estimating only 80% of the costs during concept development is unacceptable because t
19、he remaining 20% of the costs could eliminate the target profits. That company wants to be able to accurately estimate 100% of costs during concept development.) All three of the U.S. vehicle manufacturers and one of the Japanese vehicle manufacturers believe that their cost estimating activities ne
20、ed to be significantly improved.- Suppliers who supply parts to both U.S.- and Japanese-owned vehicle manufacturers point out that Japanese-owned vehicle manufacturers life cycle sales volume estimates, provided while the vehicle is still in development, are usually accurate within plus or minus fiv
21、e percent. In contrast, the suppliers say that U.S.-owned vehicle manufacturers life cycle sales volume estimates are often overstated by 11 to 25 percent. The Japanese-owned vehicle manufacturers view the estimates as commitments and hold Sales accountable for achieving their commitments after the
22、vehicle is in production. Conversely, none of the U.S.-owned vehicle manufacturers believe those responsible for making sales volume projections are held accountable for their estimates once the vehicle is in production.- Finally, a very significant result of the current status assessment was the an
23、swers provided when vehicle manufacturers were asked if profit targets, cost targets, capital investment targets, quality and performance targets, and development budgets and schedules are each effectively monitored and evaluated during the vehicle development cycle. All of the Japanese-owned vehicl
24、e manufacturer participants say each one of these factors is effectively monitored and evaluated during the vehicle development process. In contrast, the U.S.-owned vehicle manufacturers indicate that these factors are not effectively monitored and evaluated.When the current status assessment was sh
25、ared with companies in Japan that participated in the assessment, most of them expressed great surprise at the differences in the answers between U.S. and Japanese answers. Their reaction to the U.S. responses for the question about effective monitoring and evaluation of targets was almost identical
26、 at each company. Their initial response to the results for that question was disbelief, often stating that the data must be wrong. When the team assured them the data was correct, their next response was . but how can U.S. companies make a profit if they dont effectively monitor and evaluate these
27、factors.?ScopeThe original intent of this benchmarking effort was to understand how Japanese companies establish and subsequently achieve their target costs both within their organizations and with their suppliers. In fact, the team originally called the system they were benchmarking the target cost
28、ing system. However, as the benchmarking team began to investigate answers to questions, they realized that a target cost scope was too narrow. As the study proceeded, the team learned that target costing is part of a larger system more accurately referred to as cost planning. The team also learned
29、that it was necessary to understand the kaizen costing system, which is the system used to reduce costs and measure performance once a product is in production.During the study, the benchmarking team found that although profitability is not overtly discussed by top management as an ultimate company
30、goal, it is an important metric of success. In fact, several Japanese companies emphasized during discussions that the cost planning system is part of profit planning. Quality, cost and timing (QCT) are the controllable superordinate cross-functional goals that enable a company to achieve customer s
31、atisfaction and profitability goals. Although, this study explores the cost aspect of QCT, the processes used to manage the cost aspect of QCT are simultaneously applied to quality and timing factors. Since cross-functional management and policy deployment are the approaches used to deploy QCT, an o
32、verview of these approaches is included as an appendix within this report.Lessons LearnedA long list of lessons learned resulted from this benchmarking effort. Some of the more significant lessons learned are briefly described below:- The cost planning and deployment system simultaneously addresses
33、and balances quality, cost and timing (QCT) factors. This balancing is achieved through a variety of means-A single point of accountability exists for both delivering a vehicle that meets or exceeds customer needs and wants, as well as achieving the vehicle target cost. Specifically, the chief engin
34、eer/product manager is provided with the resources required to develop a first-hand understanding of customer needs and wants and held responsible for developing the product concept/development plan and basic product plan. He is also responsible for allocating the vehicle target cost in whatever man
35、ner he believes will best enable achievement of the target cost. His engineering background combined with his first-hand customer knowledge support his authority to make appropriate tradeoffs between customer satisfaction and cost.-Value engineering, which results in cost reduction without loss of p
36、roduct performance, permeates the entire cost planning system. Value engineering proposals are generated during product concept/development planning, basic product planning, target setting, prototype development and evaluation, and supplier price negotiations. A key step within value engineering inv
37、olves allocating function/performance value to parts and comparing function/performance value to parts costs to identify value engineering opportunities.-Cost estimating skills reside in the various functional organizations where estimates are required. Specifically, each functional area requiring e
38、stimates such as Design/Engineering, Purchasing and Accounting, has cost planning resources that have technical skills and product knowledge as well as financial skills. These resources ensure more timely and accurate cost estimates, and support cost reduction activities.-Development leadtimes are m
39、anaged so that they are just slightly shorter than life cycle lengths to reduce engineering resource and investment requirements.The ability to simultaneously manage QCT is critical to successfully implement the system.- Companies use cross-functional management and policy deployment to provide dire
40、ction regarding both cost planning targets and means. Cost planning is deployed through a top-down driven process where top management sets direction regarding both results and process goals-Top management establishes product price and profit targets for new vehicles identified in the cycle plan as
41、well as capital investment guidelines. This output-driven approach can be contrasted with the input-driven approach that occurs in many western companies. In many western companies, profit plans and capital requirements are developed bottom-up, often requiring numerous plan revisions if top manageme
42、nt is not satisfied with the results of the detail roll-up.-Management also sets direction regarding the means to achieve the goals and provides the resources necessary to implement the means. For example, one of the cost planning means that management established when the cost planning system began
43、 to evolve was use of value engineering. They also ensured that resources were provided to support value engineering. A more recent example of a means established by management includes use of common components across vehicles, for items that are either invisible or irrelevant to the consumer, to re
44、duce engineering resource and capital investment requirements. Each subsequent layer of management is responsible for planning how the means will be implemented and overseeing implementation of the how-tos in their organization.The appendix entitled Cross-Functional Management and Policy Deployment
45、describes managements role in the cost planning system in more detail. - Commitment and accountability are created throughout the system. In Japanese companies, targets represent commitments. Cross-functional and vertical negotiating processes are used to create targets, buy-in and accountability:-F
46、unctional department accountability is established through use of cross-functional management committees. These committees typically consist of senior management executives responsible for functions within the organization that play key roles in implementing goals and means approved by the committee
47、. Cross-functional management minimizes inter-departmental communication barriers, thereby enabling cross-functional planning of the means to achieve goals. As a result of these planning processes, cross-functional/departmental responsibilities are clearly defined, thereby creating accountability on
48、 the part of the committee members who head the functions/departments.-Negotiating processes that are used to create buy-in vertically through the organization also create accountability. An example of negotiating vertically through the organization occurs during target setting processes. Chief engineers/product
