Target Costing must be in the air

I've been catching up on my reading about Target Costing - researching tools for an existing client and refreshing my knowledge as I create a proposal for a new one. This is an area within Lean Product Development that hasn't received the same level of attention as the A3 report and set-based concurrent engineering, probably because reducing product cost is not nearly as exciting or glamorous as cutting time to market in half.

However, it's an area that a product development manager cannot afford to ignore - Toyota certainly does not. The tools required to effectively manage cost include things such as conjoint analysis to understand the relative value of specific product parameters, cost modeling to make the cost implications of specific decisions more visible, and value engineering to drive out costs at the system level. Underlying it all is a mechanism for accurately predicting product cost and then monitoring changes as the new product moves through the development cycle.

My new client has used Target Costing by M. Bradford Clifton et al as their guide. I find it to be a nice introduction with good descriptions of the basic tools.

I've just been invited to speak at the Lean Accounting Summit this September in Orlando, Florida. I'll present "Lean Accounting for Product Development" which will provide an overview of the financial information that product development teams need to effectively manage product cost during the development process. I'm looking forward to more interaction with this dynamic community. I think it may represent the next frontier in lean product development.