COST MANAGEMENT LEADERS


Target Costing (CAM-I) Figure 1


VOICE OF THE CUSTOMER Target Cost establishment


Market Research Target Cost attainment


Competitive Strategy


Product strategy and plans


Product concept and feasibility


Product


design and development


Production and logistics


Competitive Intelligence


Product development cycle


EXTENDED ENTERPRISE PARTICIPATION


Setting the cost target requires consideration of the voice of the customer, market research, competitive intelligence, and internal strategic plans. (SOURCE: Consortium for Advanced Management – International.)


of progress toward achieving the cost tar- gets becomes a formal part of the process 


A COST-CUTTING ALTERNATIVE


The basic principles and methodology of target costing are equally applicable to service products and process improve- ment initiatives in the private and public sectors. To illustrate this, imagine the fol- lowing budget reduction scenario:


Two of the most common approaches to military budget reduction are the pro rata cut and complete program elimina- tion—in essence, “Everybody take out 10 percent, or we’ll have to eliminate Pro- gram XYZ.” Eliminating a program, while


it may seem a clear way to meet budget constraints, may not always be necessary.


As an alternative, the target costing      total desired end result, mapped to the processes based on a prioritization and weighting of customer needs. The end - ally, what the customer sees as important.


MANUFACTURING READINESS LEVELS


The CAM-I Target Costing Best Practices Interest Group, whose members include technical experts from the Army, Air Force, Alta Management LLC, Boeing Co., CostVision Inc., Navistar Inc., and Whirlpool Corp., is developing a bulletin


on the leading practices for Manufac- turing Readiness Level (MRL) cost data models and processes.


DoD is establishing MRLs to manage risk during manufacturing process develop- ment. Over the past several years, DoD has held several ManTech (Manufactur- ing Technology) Program workshops   new designs for manufacturing readiness. The Target Costing Interest Group has been providing input to the Cost Mod- eling and Cost Analysis sub-threads of ManTech’s MRL Matrix, which includes criteria that match its MRL Deskbook.


Following are descriptions to help inter- pret the cost threads.


78


Army AL&T Magazine


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