Apr 292013
 

If you are a Product Cost Management person with an inner nerd like us, then you probably love and the Lord of the Rings trilogy by JRR Tolkien. One of the iconic characters in the book is the king in exile, wondering the wilds as a Robin Hoodesque type of character, a man named Aragorn.  One of the things that makes this character so compelling is the fact that he, and his brothers-in-arms, the Dunedain Rangers, secretly wander the wilds protecting those who are blissfully unaware of the evil all around them.  

Why do we love Aragorn, who goes by the nom de guerre “Strider” so much? It’s because Aragorn is unpretentious, self-sufficient, self-sacrificing, and yet dangerous and mysterious at the same time. Aragorn gets things done, even when those around him don’t realize it.  And when those around him do get to know him, they are astounded at just how powerful, efficient, and clever he is.

Yes, Strider is a misunderstood man, as Mr. Butterbur, the bartender at the Prancing Pony, the inn at Bree says,

He’s one of them rangers. Dangerous folk they are — wandering the wilds. What his right name is I’ve never heard, but around here, he’s known as Strider.

Strider and the rest of the Rangers don’t really have a home, and so it is also with Product Cost Management in most organizations. It’s very rare to find Product Cost Management a department that is not a part of a larger organization. And, it is always seems to be the red-headed stepchild of that organization.  No one really knows exactly who these guys are or what they do, except that “I think they know a lot about cost and manufacturing stuff.”  Product Cost Management never seems to fit in with the organization in which it has been placed, and everyone is always wondering if it really belongs in another organization.

So where does product cost management belong in the organization? That’s a difficult question because Product Cost Management relies so heavily on information from four different organizations. In order to do their work of profit maximization, expert in PCM deep domain knowledge of the following:

  • What is the geometry a part, a subsystem, a product, and how does the geometric features, tolerance, and materials of these physical items relate to their costs?
  • What is the costing structure of the organization, what are its overhead rates, what are its labor rates?
  • What suppliers does the organization have and what are the cost structures of these organizations? What are their manufacturing capabilities?
  • What is the organization’s internal manufacturing capabilities?

Where Product Cost Management lives in the company Hiller Associates

These are very broad pieces of information that are flung across the organization. If we look at the figure above, we see that these pieces of information are hidden in the four main functions of a manufacturing company: engineering, finance, purchasing, and manufacturing. Product cost management, like the Rangers in JRR Tolkien’s trilogy, seems to live in the no man’s land or wilderness between these organizations, where few people from any of the four organizations are comfortable operating.

Why are most people so uncomfortable operating in this nexus? Well, that’s a subject for our next post.

 

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Apr 222013
 
Project Cost Management vs. Product Cost Management

  Good Morning PCM world, Another reader sent in questions with respect to the article 2012 revenues of the Product Cost Management market.   However, this question was a little more broad:   Is there any difference between Project cost management and Product cost management from your your point of view? That’s a very simple Read More!

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Apr 172013
 
2012 Product Cost Management Revenue Assumptions

  Hello Internet and Product Cost Management industry! We’ve had strong interest in our latest article on the 2012 revenues of the Product Cost Management market. There have been several good questions that have made us want to clarify some of the assumptions in the analysis, so that people are clear on what is and Read More!

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Apr 152013
 
2012 Revenues in the Product Cost Management Software Market

Hiller Associates received a question this week from a business school asking us what the revenue of the product cost management market is. That was a very interesting question, and one that we have thought about before. However, we’ve never actually sat down to think about the question formally. So rather than answer the person privately, we Read More!

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Mar 182013
 
You want to be within 10% of the cost? (Internal Variance in Product Costing)

There are universalities that seem to cross people and cultures, such as, it’s polite to say “please” and “thank you.” These universalities also occur numerically. For example, designs that follow the Golden Ratiopop up all over the world. Many other aspects of one group versus another may vary, but there are these universal touchstones that pervade the Read More!

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Mar 042013
 
DARPA false!?  80% of Cost is Not Controlled by Design?

  We are still on our epic quest to find the DARPA study (a.k.a. the legendary seminal study reported to say that ~80% of product cost is determine in the first ~20% of the product lifecycle).  However, during our search we have been aided by Steve Craven from Caterpillar.  No, Steve did not find the DARPA Read More!

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Feb 212013
 
It's not the club... it's YOU!   (Lean = Vertical Integration = Better Product Cost Management Part 2)

Last week we talked about the struggle in corporate strategy between Core Competency structures and Lean manufacturing. Whereas Core Competency thinking naturally leads to more outsourcing and extended supply chains, Lean manufacturing would advocate for a geographically tight supply chain, often with more vertical integration. So, what does this have to do with Product Cost Read More!

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Feb 192013
 
New! IndustryWeek Article by Hiller Associates: Product Selection versus Product Development (What the product development team can learn from shopping on Amazon.com)

IndustryWeek.com has just published a new article authored by Hiller Associates title: Product Selection versus Product Development (What the product development team can learn from shopping on Amazon.com)  Synapsis: The process of product selection that people do in their personal lives (e.g. shopping on Amazon) is strikingly similar to the process of product development that Read More!

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Feb 142013
 
BFO:  Lean = Vertical Integration = Better Product Cost Management (Part 1)

I just read the following article and was smiling wryly while experiencing a BFO (blinding flash of the obvious). The Death of Core Competence Thinking This article talks about the slow… the FAR too slow… death of “Core Competence” thinking.  This is the concept that organizations should only focus on the 1-2 things that they are Read More!

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Feb 112013
 
Today's Product Cost Killing Tip -- Control the Evil Robot Overtolerancer!

There were a lot of comments last week to the article we posted with the title: Only 17% Percent of Companies Meet Product Cost Target Many people complained about the dearth of knowledge of the design engineer in Design for Manufacturability.  In the discussion, we also started to propose some solutions to overcome this problem.  However, Read More!

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