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= PRODUCT COST MANAGEMENT (PCM) =

Product Cost Management is a set of tools, processes, methods, and culture used by firms who develop and manufacture products used to ensure that a product meets its profit (or cost) target.

What is Product Cost Management and Its Scope
There does not seem to be an agreed definition for product cost management or an agreed scope for what it encompasses. Some people argue that Product Cost Management is another synonym for Target Costing

. However, other argue that Product Cost Management is different because Target Costing is a pricing method, whereas, PCM is focused on the maximum profit or minimum cost of a product, regardless of the price at which the product is sold to the end customer. Some analysts seem to equate PCM to Design-to-Cost.

Some practitioners of PCM are mostly concerned with the cost of the product up until the point that the customer takes delivery (e.g. manufacturing costs + logistics costs) or the Total Cost of Acquisition. They seek to launch product that meet profit target at launch rather than reducing costs of a product after production. Other people believe that Product Cost Management extends to a Total Cost of Ownership or Lifecycle Costing (Manufacturing + Logistics + Operational Costs + Disposal). Depending on the practitioner, PCM may include any combination of organizational/cultural change, processes, team roles, and tools. Many believe that it must encompass all four aspects to be successful and have mapped out how the four elements map out to work together .

Processes or Activities in Product Cost Management
Depending on the scope the practitioner assigns to PCM, it may include one or more of the following processes.


 * '''Change management and building a cost and profit conscious culture.
 * Building cost management into the Product Lifecycle Management Processes
 * DFM – Design for Manufacturing
 * DFA – Design for Assembly
 * DTC – Design to Cost
 * DFP – Design for Procurement
 * VA/VE – Value Analysis / Value Engineering
 * DFSS – Design for Six Sigma
 * Cost Targeting
 * Should Cost / Price
 * Make Buy
 * Capital Asset Justification
 * Commodity Pricing
 * Spend Analytics'''

Tools for Product Cost Management
Initially, PCM was done with pencil and paper, however, with the advent of computers, companies started to create internal software for predicting, controlling, minimizing, recording, and sharing product costs. With the invention of spreadsheets, PCM tools got a major boost in ease of use and adoption. In the late 1970’s, specialized third party software that could do some of the activities included in PCM. Today, there are several tools that directly or indirectly promote themselves as “Product Cost Management” software. Some of these tools also say that they can help users with problems of Target Costing, as well.

However, despite the creation of third party tools, spreadsheet, specifically Microsoft Excel may still be, overwhelmingly, the most popular tool for Product Cost Management practitioners.

Is PCM a Software Category?
In the middles of the 2000’s, there was some discussion of whether PCM (sometimes referred to as Enterprise Cost Management) would become a separate software category or be part of one or more of the existing enterprise software categories of Enterprise Resource Planning (ERP), Product Lifecycle Management (PLM), or Supply Chain Management (SCM). However, the providers specialized PCM software have not yet gained the revenue tracking for the major industry analysts to proclaim PCM as its own category. However, there has been at least one analyst report focusing on Product Cost Analytics .  It is unknown whether PCM will become firmly part of a bigger enterprise software category. At least one of the major ERP vendors and two of the major PLM vendors have products that they bill as Product Cost Management or Analytics solutions.