My last post outlined the significance of Product Cost Management (PCM) for OEMs and Suppliers to drive profitability and continuous improvement throughout the entire supply chain.

Ideally, PCM needs to be done early in the product development cycle, as early as the conceptual phase – design and supplier selection is much more flexible early in the process – so it is important to enable cost engineering during the front end of product development and ensure profitability with control over costs for parts and tooling.

Not everyone can optimize cost early, or not in all situations. PCM processes and tools may also need to be applied in later stages of the product lifecycle. Even when cost models and consultation based on facts get applied early in the lifecycle, there might be a need to do it several times over the lifecycle, so PCM needs to support the cost model across all corporate functions from product development to sales and establish a single consistent repository for estimating and communicating cost with repeatable processes and historical information. As PCM is spread over the product lifecycle, it’s important to take an enterprise-wide approach to costing. An ideal PCM system needs to align with the product development process managed in a PLM system, so there is lot of synergy between a PLM and PCM.

The most commonly used tools for PCM – spreadsheets and custom programs that conduct simple rollups – are not suitable for enterprise-class wide processes; these solutions do not provide the details required to develop credible cost models. They also make it very difficult for designers to compare products, concepts, and scenarios. Spreadsheets fail due to quality problems and the inability to implement them effectively on an enterprise scale, resulting in different product lines, geographies, or lines of business having different approaches. Non-enterprise approaches also make it difficult to reuse information or apply product changes, currency fluctuations, burden rates updates, or commodity cost changes

By extending an enterprise wide system like PLM for PCM functions, cost management is effectively communicated and captured to institutionalize it for future product programs.  This eliminates disconnected and inconsistent manual costing models, and complex difficult to maintain spreadsheets.  This also supports easy, fast, and reliable impact analysis to incorporate product changes accurately into costs with visibility to all cost factors and make these processes repeatable. The PCM process can also leverage the existing 3D model parametric data managed in PLM systems to extract the relevant parameters such as thickness, surface, and volume for the feature based calculations. Other PLM data that can be reused for PCM includes labor rates from engineering project management, material costs from material management modules, bill of materials/process and tooling involved with engineering and manufacturing data management. An integrated PLM and PCM solution is also important for efficiency and allowing companies to reuse both product data and cost models to facilitate continuous improvement over time .

In the next post of this series, I explain how the Siemens PLM Teamcenter suite supports PCM.