Stay cost competitive! Cost and Value Engineering with Product Costing

By Emilia Maier

Cost and Value Engineering – the smart way to deliver maximum customer value at lowest cost!

Driving the bottom line through profitable revenue growth is the objective of most companies. This should be the number one focus, of course. If you’re not growing, you’re dying. Companies should be focusing on controlling product costs, constantly. Many times requests to reduce the product costs result from external factors and that requires a quick response. In fact, these requests can often appear to be ad hoc. Reasons for the request vary. Let’s say, a competitor introduces a lower-priced product and thus squeezes your product’s margins. Overly enthusiastic sales forecasts fall below expectations and product revenues barely cover fixed costs. Even more common, a supplier raises its price and these costs cannot be passed along as price increases to your customers.

The cost and value engineering approach leads to the identification of value and cost drivers in the value creation process and for systematic processing and optimization of the technical and economic influencing factors. This can be achieved through the close collaboration of all relevant business functions like Engineering, Finance/Controlling, and Procurement.

With the professional solutions for product costing, such as Teamcenter product cost management, the cost of all components of a product can be accurately calculated. The costs for prototypes can also be determined by means of 3D data or even sketches. Alternatives to existing materials, more cost efficient manufacturing techniques, or the amount of production costs at different production sites can be simulated. Thus, potential for improvement can be made for the planned concepts and a derivation of target costs in the early development phase. In addition, for make-or-buy decisions, the solution helps in the calculation of product costs, which provides an indispensable basis for later sustainable success.

Teamcenter product cost management supports cost and value engineering by providing cost calculation that help to achieve cost transparency in order to identify cost optimization potential, provide valuable input for design decisions and negotiation support for procurement with their suppliers. Do suppliers benefit from such relationships, too? Yes, they can! Their business-intake is more stable and they become more cost-competitive since they receive support when it comes to improve productivity in their own value chain which is the basis for a long-term collaboration.

Pioneers from different industries already use Teamcenter product cost management to support the cost and value engineering approach. Read their successful stories e.g. Siemens AG and Festo.

Check out the 30-minute on-demand webinar discussing how you can gain detailed insights into product cost structures and manufacturing processes with purchase price analysis and how to manage the product and tool costs in cost engineering.

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This article first appeared on the Siemens Digital Industries Software blog at