Reach your project target costs with lean cost planning, the Toyota Way

Cost Planning is one of technique of cost management to accomplish target cost from earlier phase of project. I would like to explore the difference between Finance (Financial Accounting) and Cost planning (Management Accounting) and their distinct uses. While many companies implement Financial Accounting, few successfully implement Cost planning. Cost Planning is a proactive activity in which a company strives to achieve a target cost, starting this effort early in the concept and planning phase. In contrast, Financial Accounting centers on a results-based target, not an activity-based target. Another significant difference is that Cost Planning is normally led by a project leader or an engineer, while Financial Accounting is usually led by Finance personnel. Only few automobile firms implement Cost Planning successfully through the use of an excellent “cost data” which details not only material and labor, but also sales, logistics and administration costs for new product development efforts. Cost Planning allows engineers to estimate the costs quite accurately at early phases of the project. Even for new (non-existing) products, the cost planning teams can make accurate estimates based on historical data and other related data. These estimates are needed for quick decision making. For global product development, the digital formatted cost planning is necessary to accomplish product target. We will share not only physical, but also digital cost planning.