Predictive cost management

Put the brakes on costs without stifling innovation.

Systematic cost management allows any business to reap significant benefits, yet many companies struggle to implement it effectively. The challenges are often the same.  

  1. The technical department makes decisions without knowing the true cost impact.
  2. The necessary cost transparency isn't in place to negotiate the appropriate prices.  
  3. The implementation of cost measures fails in cross-functional coordination or lack of resources.  
  4. Decisions regarding product costs aren't made until after the start of series production.

The implications of these problems are clear. The desired gains aren't achieved, there are delays in measures being implemented and the development of innovation is severely restricted.  

Successful cost management with newboxes enables a systematic set of cost management activities and processes with modern tools that can be used throughout the organisation wherever it matters.  

Get to know a completely new face of the supposedly old cost management with us and our partners.

With our innovative methods, proven in operational implementation, we create the necessary cost transparency within a few days, set up a sustainable program and support you in generating and implementing new cost measures

Change in cost management

The new, agile VUCA world (volatility, uncertainty, complexity, ambiguity) is one where software is overtaking mechanics, new digital business models are becoming increasingly important, service costs are growing strongly in importance, digitalization and artificial intelligence is making progress every day, and much revolves around the analysis of big data. Here, cost management must also keep pace.

Future-oriented cost management takes the following into account:

  • translating new technologies into costs
  • pricing models for data and software
  • Total Cost of Ownership (TCO) and Lifecycle Costs (LCC)  
  • cost engineering in early phases
  • increased efficiency through digitalisation
  • cost calculation of future company structures
  • increased complexity management
  • availability of data and information
  • consideration of sustainability aspects
  • knowledge management

With our partner, 4cost GmbH, and its innovative methods for cost and price calculation, we can set up cost programs that meet both established methods and new trends.

We distinguish between four phases, which we'll explain in this paper:

Cost transparency and target derivation

Your project starts. You're ready. But do you also have the necessary cost transparency? Can you derive goals for cost management that will stand up to questions from program members? Have you defined the right products (corner types) that need to undergo cost optimisation? What's your cost management plan for the short, medium and long term?

newboxes works with its experienced partner 4cost to provide answers to these questions.

Using standardised processes, 4cost analyses your product portfolio, derives the right products (corner types) for cost optimisation and defines program goals that stand up to any discussion.  

4cost's innovative parametric models allow fast, yet accurate determination and analysis of costs and prices. Starting from a basic structure, which can either be read in by reference models or created from scratch, a detailed cost breakdown is presented.

Based on five parameters, target costs for components, modules or an entire system can not only be calculated within a few hours, but development efforts, project costs and software can also be determined.

The same structure is used throughout the entire product life cycle process. As a result, cost models can be further developed as the products mature. The initial top-down calculation based on pictures or sketches can be extended and thus refined by a bottom-up analysis based on parts lists and drawings.

4Cost's parametric models can therefore be used to evaluate electronic and mechanical assemblies as well as software. Technical and business scenarios are presented. As a result, you can with maximum accuracy:

  • assess production costs
  • estimate software developments
  • calculate development costs
  • calculate prototype costs
  • simulate life cycle costs (LCC)
  • derive Total Cost of Ownership (TCO)

This results in advantages for you that enable a successful program start:

  • fast and precise cost estimates based on mathematical dependencies
  • no database necessary
  • measurably less effort compared to detailed calculation (at least 20-fold speed advantage)
  • little information required
  • rapid consideration of variants (countries, quantities, technologies, etc.)
  • provides technology-neutral benchmark data (Greenfield & Brownfield)

Cost management program implementation

As mentioned in the introduction, cost management has a significant impact on a company's success. That's why we often find an existing cost structure, but one confronted by various challenges:

  • the necessary resources aren't available to the project or haven't been considered.
  • the necessary know-how is distributed throughout the organisation in various functions.
  • most cost estimates depend on a small group of people.
  • most cost estimates are made independently of the person making the immediate product design decision.
  • the tools and systems employed are very difficult for many employees to use.
  • new information is not integrated into the current process.
  • several different cost estimates exist.  
  • various methods that require a lot of time and effort and aren't based on previous estimates are used to calculate costs.
  • a lot of information needed to estimate costs isn't available to the estimator.
  • The implementation of cost measures fails in cross-functional coordination and in goal conflicts.

To counteract these problems, in the first step we conduct an assessment of your cost organisation to evaluate whether the right goals have been defined, the necessary organisation set up, the right processes implemented, the necessary roles described and efficient IT tools implemented.

Putting the right team together in a cost program and building cost management support functions within the organisation are the foundations for success. The key roles in implementing a cost management program are touched on in the diagram below.

No cost program can be successful without the expertise of your staff. It's therefore not only a question of the right roles, but also of the necessary capacities of the experts.

We then introduce a standardised process by which all cost measures are driven so that there is a common understanding:

The next steps are the analysis and, if necessary, the adaptation of the IT tools. Here, the following questions are necessary for us to assess the IT landscape:

  • Are there product costing systems that can quickly and consistently generate and manage accurate cost estimates?  
  • Is there a system for sifting through and analysing large amounts of data and identifying cost outliers and trends?  
  • Are there tools to document and track cost management measures?

Once the program organisation has been set up, and processes and IT tools installed, the generation and implementation of ideas can begin.

Generate, evaluate and implement cost measures

A constant supply of new ideas is an essential part of successful cost management, but it also presents many companies with various challenges.  

With our standardised method toolbox, we support you in the continuous generation of new cost reduction ideas, so that demanding targets can be met.  

Based on your portfolio, we create an action plan of which products will be processed with which methods. The diagram below shows examples of methods we use to generate new technical or commercial ideas.

Subsequently, an initial evaluation of the ideas is carried out to be able to determine a prioritisation in the processing. All cost reduction measures are documented in the cost tool.  

By defining ownership for each idea, we ensure that the prioritised actions are expedited as efficiently as possible.  

Each cost idea then goes through the same process. Each generated measure is first described in detail. This is followed by the preparation of a schedule and cost plan, which are combined in a business case. The measure is presented to the decision-making body for approval for implementation.  

After that, the preparation of the measure for series production begins. This is determined by the cost organisation. After the successful application in series production, the cost optimisation is validated.

Anchoring cost management in the line

Optimising costs in series production by means of a cost program is an important point to maximise profit. This will always be so because of constantly changing technologies, manufacturing processes as well as rapidly changing IT and the new possibilities it offers.

But it is also no secret that costs are better avoided, rather than optimised later. That's why implementing the previously mentioned topics (organisation, roles, processes, tools and methods) sustainably into your development process is important to us, in order to be able to effectively use the greatest cost leverage.

We analyse your existing product development process and make appropriate adjustments to anchor cost management in your development processes.

  • Implementation of Target Cost Process
  • Top-down / bottom-up targets
  • Definition of target cost structures (broken down from the overall system to individual modules / assemblies)
  • Adjustments to the project organisation
  • Roles with clearly defined tasks, competencies and responsibilities (AKV)
  • Implementation of a control model
  • Introduction of methods for cost-oriented development
  • Implementation of IT tools for top-down and bottom-up cost calculation / analysis
  • Documentation of ideas and measures in a knowledge database

Implementation with us

Effective cost management offers tremendous opportunities but presents companies with some challenges. Bring your cost management to the same level with us.  Learn from us how to create cost transparency within a few days or weeks and how to set up effective and efficient cost programs and realise savings potentials of up to 30%.

Contact us and make cost management an integral part of your organisation.

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