aPriori Examines How Discrete Manufacturers Look at Product Costs

Discrete manufacturers have been forced to take a  rear view look at product costs, such as evaluating and allocating product costs well afterproduction was underway.

Cost information in most organizations is fragmented throughout the enterprise. Critical pieces of cost information are spread across independent silos within anorganization in different functions like engineering, planning, manufacturing,sourcing, finance, etc. This situation typically results in estimates that do notinclude all relevant information required to make accurate and predictive productcost assessments. In most organizations product cost estimates are developed byspecialized organizations in cost engineering or VA/VE departments. In most cases,these cost estimates are created separately and independently of the people makingthe design, manufacturing, and sourcing decisions. This separation results in manydecisions being made in a cost knowledge vacuum. The impact of these decisions istypically not known for at least a full financial period after production is wellunderway.

According to Frank Azzolino, President & CEO of aPriori, the Massachusetts basedCost Management Platform company, Â Product cost estimates (especially early ones)are often based on historical information or very general heuristics (e.g. weight)and are too inaccurate and lack statistical confidence for effective decisionmaking. Most cost estimating activity falls on a relatively small group ofspecialized people spending hours manually producing each estimate. Since thedemand for costing feedback cannot always be met, the opportunity to experiment withthe cost impact of design, manufacturing, planning, sourcing, etc. alternatives islimited and can not be readily cost optimized.Â

Most cost estimates are static and are not continually updated when new design,manufacturing, planning, or sourcing information becomes available as the productprogresses through its design-to-production-to-delive ry lifecycle. Out-of-date costinformation can not be relied upon for downstream decision making. Costingpractices are not always standardized across the enterprise. As more information isavailable, different costing practices and methods are used to re-cost items.Unfortunately this makes it difficult to leverage previous estimating work and buildtraceability in product cost accrual.

Typically cost estimates are not managed through a productÂ's development throughproduction lifecycle. Multiple cost estimates from different sources are created asdifferent times during the process. It becomes unclear which product cost estimateis current or valid. TodayÂ's cost accounting methodologies begin with the financialstatement for the prior closed financial period. The costs in that period are thenallocated across various product lines and processes which are then furtherallocated for each individual product. These are by definition  rear view mirrorproduct costs.

aPrioriÂ's Cost Management Software Platform enables manufacturers to betterunderstand product cost decisions early and throughout the product lifecycle. aPrioriÂ's Cost Management Platform empowers manufacturers to lower cost-of-goodssold (COGS), provides real-time visibility to  cost-critical decision information,and builds critical cost knowledge to go on the business  offensive. aPrioriÂ'spatent-protected cost management platform allows companies to assess, control, andreduce cost of goods sold by whole percentages. The aPriori Platform enables  CostKnowledge Before it Matters.Â

Source: Express-Press-Release.com

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