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Design projects can be delayed by squabbling or by an inability to drive down design or production costs in a reasonably efficient manner. This delay may lead to serious cost overruns in the cost of the design team itself, which can lead to abrupt termination of the entire targets costing system by the management team. However, these problems can be mitigated or completely eliminated by ensuring that the steps listed here are completed when the target costing system is first installed :
1. Create a project charter: The target costing effort should begin with a document, approved by senior management, that describes its goals and what it is authorized to do. This document, known as the project charter, is essentially a subset of the corporate mission statement and related goals as they pertain to the target costing initiative. Written approval of this document by the senior management group provides the target costing effort with a strong basis of support and direction in all subsequent efforts.
2. Obtain a management sponsor: The next step is to obtain the strongest possible support from a management sponsor. This should be an individual who is well positioned near the top of the corporate hierarchy, believes strongly in the goals of target costing, and will support the initiative in all respects—obtaining funding, lobbying other members of top management, working to eliminate road blocks, and ensuring that other problems are overcome in timely manner. This person is central to the success of target costing.
3. Obtain a budget: The funding should be based on a formal allocation of money through the corporate budget, rather than a parsimonious suballocation grudgingly granted by one or more departments. In the first case the funds are unreservedly given to the target costing effort, whereas in the latter case, they can be suddenly withdrawn by a department manager who is not fully persuaded of the need for target costing or who suddenly finds a need for the money elsewhere.
4. Assign a strong team manager: Because the typical target costing program involves so many people with different backgrounds and represents so many parts of a company, it can be difficult to weld the group together into a smoothly functioning team focused on key objectives. The best way to ensure that the team functions properly is to assign to the effort a strong team manager skilled in dealing with management, the use of project tools, and working with a diverse group of people. This manager should be a full-time employee, so that his or her complete attention can be directed toward the welfare of the project.
5. Enroll full-time participants: A target costing team member puts the greatest effort into the program when he or she is focused only on target costing. Thus, it is essential that as many members of the team as possible be devoted to it full-time rather than also trying to fulfil other commitment elsewhere in the company at the same time. This may call for the replacement of these individuals in the departments they are leaving so that there are no emergencies requiring their sudden withdrawal back to their “home” departments to deal with other work problems. It may even be necessary to permanently assign them to a target costing program, providing them with a single focus on ensuring the success of the target costing program because their livelihood are now tied to it.
6. Use project management tools: Target costing can be a highly complex effort especially for high-cost products with many features and components. To ensure that the project stays on track, the team should use all available project management tools, such as Microsoft Project (for tracking the completion of specific tasks), a company database containing various types of costing information, and a variety of product design tools.
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