Lean Manufacturing is a continuous cost improvement process which addresses waste in the manufacturing process. LEAN as it is referred to, is a generic adaption of concepts which were developed since 1948 by the Toyota Motor Company, and referred to as the Toyota Production System or TPS. The term LEAN itself was coined by an MBA student (and former Toyota employee) at MIT during the 1980s….
As we move quickly out of recession, many companies find themselves unable to meet excessive customer demand due to constraints within their own value stream. This limitation ultimately means lost revenues, reduced contribution margin and even lost market share.
The meaning of Target Costing can be understood from its title. What does a product cost? And particularly, how much should it cost in the future?
In principle, there are two ways of estimating (calculating) the cost of a product; Bottom-up and Top-down. In the first, the individual cost elements are identified and when added together give the total product cost. Target Costing, however, focuses more from the Top-Down viewpoint. This means that the maximum possible cost of the product is determined by the market price of the product. The actual target cost is the market price less the profit margin….
Design-to-cost is a strategic management commitment to invest in the present for a significantly greater reward in the future. Design-to-cost is one of the strongest levers in the cost improvement toolbox.
Design-to-cost simply means designing a product from scratch to meet the “target cost” or the market price which customers are willing to pay, for a particular (or specified) level of functionality and quality, while returning a profit to the enterprise….
Supplier Suggestion Program
One of the most effective ways to improve the cost structure of materials management is to implement a supplier suggestion program. This best practice can be implemented effectively in any organization where purchased goods and services play a role.
The premise is that suppliers understand a portion of your supply chain, as well as, or perhaps better than you do. The supplier suggestion program allows suppliers to make suggestions, which from their point of view, improve either material content (cost or function), product functionality, or improve a process step in manufacturing. This can equally apply to service industries….
Raw Material Increase
Raw Material Increase (RMI) allows the partners in a sourcing agreement to regularly review the “market cost” of a specific raw material, which is used in the manufacturing of the sourced component….
Systematic Process Management
Business processes in most organizations offer considerable cost savings opportunities. By taking a systematic approach to improving business process, profitable and sustainable results can be achieved, often in the medium term. The main focus is to systematically evaluate these processes with the view to improving, combining or eliminating them. All business fields and functional activities should be targeted for improvement….
Cost Value Analysis
Cost Value Analysis (CVA) is an effective way to reduce the costs of a business’ own products by evaluating all cost aspects of a product or service to determine if cost-improvement opportunities are available….
Claim Management is a critical aspect of business for companies involved in providing bespoke or purpose built goods and services. It also applies to companies selling standard goods and services, but to a lesser extent….
Effective management of customer or supplier claims can have a significant positive impact on the financial situation of the business. Therefore, it is considered a Cost Improvement Best Practice….