------------------------------------------------- operatıons management project report
Cost management through product design: target costing approach, Yasemin Zengin and Erhan Ada
In this paper, target costing tool combined with other management techniques, namely Quality Function Deployment (QFD) and Value Engineering (VE), has been focused with a case study. In this case study, QFD-TC (Target Costing) methodology has been executed in a SME (Small and medium enterprises) and it is showed that, integrating target costing with QFD and VE techniques is highly effective on managing the costs of product and overall production process.
Introduction / Motivation
In today’s world, customers demand increased functionality and quality with …show more content…
Using the target costing module, the cost of a hydrostatic testing unit was calculated as E1.799,26. With a mark-up of 20%, the unit selling price of the Company totalled up approximately E2.160,00, more than the price of the domestic producer.
Step 3: Target Costing
According to customer survey results, the selling price was calculated to be E1.803,75 per testing unit and it was decided to set a market price for testing unit that was 7.5%, but which included a 20% profit for the company.
Step 4: Cost breakdown on cost drivers and Step 5: target costing through product design.
After determining a target cost, according to customer feedbacks, company’s different teams work together to reduce cost to target cost. After considering QFD analysis and main cost drivers, the production team listed the following additional components illustrated in Table 1.
The optimal product was designed by keeping the balance of the survival tripod. In Table 2, the items and the costs of the new design are given. The new design of the product resulted in a total cost of E1.490,29 per unit.
Step 6: Continuous improvement.
Regardless of whether a target cost is achieved, efforts for continuous improvement should be provided to maintain the profitability and market position of the product.
Pros and cons in the implementation of QFD–TC process
* Company realised a considerable cost reduction for the
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Assuming that the company’s goal is to maximize profits, the current cost system is not an appropriate tool for strategic planning. The ambiguity of the overhead costs per product makes it difficult to accurately analyze the cause and effect relationships of changes and/or improvements to specific product line.
This report will provide insight on what your management team should do concerning production costs. We will examine 2 different scenarios and provide our decision as to which makes most sense. In the first scenario, the total fixed cost of the production is 1,000,000. In the second
This will be achieved through the commitment to continuous improvement in every aspect of satisfying customers’ everyday merchandise needs,. Its customers will be a broad cross section of society who want or need to save money.
As we continue to move toward the end our quarterly objectives. I wanted to take the time to explain some of our costs. In our particular field of designing and manufacturing products, we are always engaging in ways that we can mitigate loss and improve our processes. Performing such changes will give a stronger presence in the market by allowing us to remain competitive.
Under an ABC system, the allocation of costs to products is achieved through at least four analytical steps. Firstly, costs are grouped into activity levels. Secondly, cost drivers are
We started the case analysis by the normality test for the current data to check if the data is normally distributed or not. Our objective is to calculate the current Total Cost and then come up with a better solution to lower the cost.
However, as a new member with a new product, electronic product in North American market, the reputation is also an important attribute. Especially, quick delivery time is a key attribute for this company, due to the demand of quick delivery in all markets. Moreover, the manufacturing process of the new product, electronic product, on which our company will definitely focus, has a lot demands. Such as, technology, innovation and quick delivery time even the ability to make the product be the first one appearing in the market (other company, which is developing the same product, may become our competitive opponents). Especially, technology is predicted to play the most important role in the manufacturing process. On the other hand, the traditional cost system has a lot of limitations. Traditional costing system focuses on the cost reduction and the efficiency, particular the products with relatively few standardized components; Clifton, however, produces a wide range of airplane components. In addition, nonfinancial aspects of
Cumberland Metal Industries is evaluating a new product that makes pile driving less costly and more efficient. The product is a cushion pad made from curled metal that prevents the shock of a hammer from damaging the hammer or the pile. Currently the industry uses asbestos pads and is the only form of competition the company faces. If adopted there is potential to sell 29,000 to 39,000 sets of pads (6 pads per set) annually. The most important issue CMI management faces is setting the price of each pad, in the words of Robert Minicucci “ The way we price this could have a significant impact on everything else we do with it.” CMI will consider a range or pricing options such as cost based pricing, competitor based
Businesses – from manufacturing, merchandising and service industries alike – take careful considerations for their costing systems. Setting-up competitive prices in the market can be a result of proper costing methods. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods Zauner Ornaments are currently using and upon conclusion, it will enable us to distinguish the advantages and disadvantages of each costing method.
One of the struggles of companies, governments, and individuals is on making the right decisions from developing products, implementing projects, and purchasing a car, respectively. Making the right decisions is what leads to success; for this reason, researchers and system engineers have developed tools which would be very helpful to measure and track the decisions in order to ensure that the decisions are strong, with informative and research support. Pareto Analysis (PA), Paired Comparison (PC), Grid Analysis (GA), Decision Analysis (DA), Quality Function Deployment (QFD) are some of the most commonly used tools for decision making (Mann, 2005). However, we chose to study QFD and to what extend we can use it. QFD is defined as a technique for developing a design quality aiming at satisfying the consumer and then translating the consumer’s demand into design targets and major quality assurance points to be used throughout the production phase (Akao, 1990). QFD was invented in Japan by Dr. Yoji Akao and Dr. Shigeru Mizuno in 1966, but it was applied in Mitsubishi’s Kobe shipyard in 1972 as a result from attempting to improve the development cycle and ensuring to satisfy the customer’s needs (Khurana, 1992). Quality Function Deployment in Japanese is Hin Shitsu Ki No Ten Kai. The US adopted this method in the 1980’s and it slowly became popular throughout the world.
INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to
Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.
3.1 Target costing: It is the estimated price for a product that customers will be willing to pay. The estimates are made on an understanding of customers’ perceived value for a product and competitors responses. Example is in Appendix5. Benefits of target costing at the distribution centres are like helping identify value and non value activities, helping cut costs (material, handling, transportation, installation cost),Increasing
The market introduction project of a new product is as important as its design project. When a company is budgeting for a new product project, it is fundamental to include the marketing expenses in the initial budget, thus, the company will not have future surprises. Dr. Levoy, in his article, The difference between efficiency and effectiveness, he explains that it may be a waste of time if a company has an entirely efficient manufacturing process, however, at the end is not effective, or does not achieve its objective, such as bringing more clients or selling a new product, (Levoy, B., 2011). This is the importance of a marketing project, the marketing professionals can sell ideas, products, services, anything that is marketable, and if a company is launching a product I believe that the goal is to reach the customers. Therefore, to understand well our plan for Fiat Chrysler and the launching of the new Jeep Wrangler Pickup Truck, we design the following schema to explain the plan details: 1. A fast explanation of the actual market and some challenges; 2. Explanation of the nature of the new product to be launched and its industry; 3. The marketing project to introduce the new product to the customers; 4. Explanation of how we will use the Total Quality Management - TQM tools to measure and control the marketing plan execution; 5. How FCA already applies TQM philosophy to achieve client satisfaction and how we can expand the use of TQM