Low profit margins and lack of cost competitiveness
Intense competition often results in low profit margins for products and a lack of cost advantages, making it challenging to compete on pricing with leading companies.
Product Cost Management
This solution addresses full lifecycle product cost management needs for manufacturing enterprises, with a focus on the new product development phase and a target-cost-driven management framework.
Using a configurable Cost BOM as the core data carrier, the solution integrates cost planning, estimation, control, and continuous improvement into a closed-loop system.
Supported by full-element cost models, it enables fine-grained part cost calculation and connects product-level and part-level cost management, helping enterprises enhance product profitability and cost competitiveness while supporting high-quality product development and management decision-making.
Using a configurable Cost BOM as the core data carrier, the solution integrates cost planning, estimation, control, and continuous improvement into a closed-loop system.
Supported by full-element cost models, it enables fine-grained part cost calculation and connects product-level and part-level cost management, helping enterprises enhance product profitability and cost competitiveness while supporting high-quality product development and management decision-making.
Business Problems
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Inadequate cost planning management and significant product cost overruns
Extended new product development cycles, complex product structures and configurations, and frequent design changes make cost control very difficult. As a result, target cost overruns are common as products approach the production stage.
03
High barriers and poor collaboration between cost management and other business departments
Many enterprises lack a systemized procurement and cost control process, especially in product planning and design stages. High barriers exist between the cost management department and other business departments, resulting in poor collaboration.
04
Manual cost management operations, low efficiency, and lack of transparency
In many cases, early BOM outputs are untimely, data quality is inadequate, and activities such as target cost setting, sourcing, and price changes are primarily manual. This manual approach leads to inefficiencies, decentralized offline data management, inconsistent rules, and a lack of transparency in cost control. Traditional cost accounting systems struggle to meet cost management requirements for the product creation process.
Solution Overview
Thanks to years of hands-on experience within large-scale manufacturing industries, Gant Software offers comprehensive product cost solutions across the entire lifecycle for manufacturing enterprises:
● Center on the product development process, with target cost management as the guiding principle, and cost BOM as the core data carrier.
● Integrate product cost planning, cost estimation, cost control and cost improvement into a cohesive management process.
● Refine cost estimates based on a full-factor cost model to effectively improve the cost management capabilities for new products within the enterprises.
Solution Values
Achieve transparency and visualization across the entire cost management process
Accurate cost control based on cost BOM
Support cost-oriented design processes
Accumulate cost data assets
FAQ
Why do manufacturing enterprises commonly suffer from“cost opacity and lack of control”? What is the real root cause?
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The main reasons include:
• Cost data scattered across R&D, procurement, process engineering, and finance, with no unified platform.
• Lack of cost feedback during the design phase, resulting in “cost compliance only known after design is completed”.
• Part cost estimation relying heavily on experience, lacking reusability and transparency.
• Difficulty in tracking the cost impact of product changes.
• Cost reduction initiatives lacking systematic management and knowledge retention.
Fundamentally, enterprises lack a structured, quantifiable, and traceable product cost management system.
• Cost data scattered across R&D, procurement, process engineering, and finance, with no unified platform.
• Lack of cost feedback during the design phase, resulting in “cost compliance only known after design is completed”.
• Part cost estimation relying heavily on experience, lacking reusability and transparency.
• Difficulty in tracking the cost impact of product changes.
• Cost reduction initiatives lacking systematic management and knowledge retention.
Fundamentally, enterprises lack a structured, quantifiable, and traceable product cost management system.
What is Target Cost Management? Why is it difficult for enterprises to achieve target cost compliance?
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Target cost management means setting a target cost at the early stage of product development and ensuring that design, process, and procurement decisions are all aligned with that target.
Typical reasons for failure include:
• Target costs not decomposed down to part level.
• Cost impact of design changes cannot be quantified in real time.
• Lack of end-to-end process monitoring across R&D, procurement, and manufacturing.
• Lack of simulation tools to optimize design and sourcing strategies.
To achieve effective target cost management, enterprises must build system capabilities based on Cost BOM, parametric models, and multi-source data integration.
Typical reasons for failure include:
• Target costs not decomposed down to part level.
• Cost impact of design changes cannot be quantified in real time.
• Lack of end-to-end process monitoring across R&D, procurement, and manufacturing.
• Lack of simulation tools to optimize design and sourcing strategies.
To achieve effective target cost management, enterprises must build system capabilities based on Cost BOM, parametric models, and multi-source data integration.
Why do many enterprises lack effective target cost planning in early product development? How should enterprises establish a target cost system?
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Common root causes include:
• Lack of methodology: No structured cost decomposition and target-setting approach.
• Lack of data: Incomplete material, process, rate, and historical project cost data.
• Lack of feedback: No real-time cost feedback during design.
• Lack of collaboration: Procurement, process, and quality teams cannot participate in early cost decisions.
• Lack of systems: Target cost setting, tracking, and change management rely on manual work and Excel.
These issues directly lead to:
• Inability to evaluate cost feasibility during product planning.
• Frequent cost overruns and rework during development.
• Post-SOP price squeezing that damages supplier relationships.
• Long-term lack of stable cost competitiveness.
• Lack of methodology: No structured cost decomposition and target-setting approach.
• Lack of data: Incomplete material, process, rate, and historical project cost data.
• Lack of feedback: No real-time cost feedback during design.
• Lack of collaboration: Procurement, process, and quality teams cannot participate in early cost decisions.
• Lack of systems: Target cost setting, tracking, and change management rely on manual work and Excel.
These issues directly lead to:
• Inability to evaluate cost feasibility during product planning.
• Frequent cost overruns and rework during development.
• Post-SOP price squeezing that damages supplier relationships.
• Long-term lack of stable cost competitiveness.
Can part cost estimation be accurate? How can enterprises build a reliable cost estimation system?
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High accuracy is achievable, but only through the combination of methodology + modeling + data:
• Analogous estimation: suitable for early stages without detailed data.
• Parametric estimation: suitable for structurally clear parts.
• Process routing estimation: suitable for machined parts (process + time + equipment + labor).
• Supplier quotation analysis: for validation and optimization.
A reliable system requires:
• A stable base cost library for materials, processes, and rates.
• A structured estimation model library.
• Automated estimation and validation workflows.
• Digitalization of cost expert knowledge.
This is also the core motivation behind many enterprises building cost platforms such as iCOST.
• Analogous estimation: suitable for early stages without detailed data.
• Parametric estimation: suitable for structurally clear parts.
• Process routing estimation: suitable for machined parts (process + time + equipment + labor).
• Supplier quotation analysis: for validation and optimization.
A reliable system requires:
• A stable base cost library for materials, processes, and rates.
• A structured estimation model library.
• Automated estimation and validation workflows.
• Digitalization of cost expert knowledge.
This is also the core motivation behind many enterprises building cost platforms such as iCOST.
How can “cost visualization” and “cost control” be achieved during product design?
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The key is to allow designers to see cost impact at the moment design decisions are made:
• Parameter changes → automatic cost recalculation.
• Material and process changes → automatic cost update.
• Automatic BOM-level cost roll-up.
• Multi-version design cost comparison.
• Automatic manufacturing cost evaluation based on process routing.
This is the foundation of Design-to-Cost, a core capability of modern manufacturing enterprises.
• Parameter changes → automatic cost recalculation.
• Material and process changes → automatic cost update.
• Automatic BOM-level cost roll-up.
• Multi-version design cost comparison.
• Automatic manufacturing cost evaluation based on process routing.
This is the foundation of Design-to-Cost, a core capability of modern manufacturing enterprises.
Why must manufacturing enterprises establish a Cost BOM? How is it different from EBOM and PBOM?
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EBOM defines structure, PBOM defines process, while Cost BOM is the backbone of enterprise cost management:
• Organizes cost elements around parts.
• Manages material, process, manufacturing, and logistics cost composition.
• Supports target costing, estimation, change analysis, and cost simulation.
• Enables real-time cost updates with design changes.
Without a Cost BOM, digital product cost management is impossible.
• Organizes cost elements around parts.
• Manages material, process, manufacturing, and logistics cost composition.
• Supports target costing, estimation, change analysis, and cost simulation.
• Enables real-time cost updates with design changes.
Without a Cost BOM, digital product cost management is impossible.
Why do product changes often throw enterprises into cost chaos? How can “change = traceable cost” be achieved?
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The main challenges include:
• Lack of automatic linkage between changes and cost.
• Inability to calculate cost deltas in real time.
• Difficulty in unified evaluation of supplier, process, and material impacts.
• Cost ledger confusion caused by poor version management.
To achieve cost transparency, enterprises must build:
• Cost models that understand change impact.
• Automatic before/after cost delta calculation.
• Cross-department change cost evaluation workflows.
• Cost ledgers recording the source and impact of every change.
This is a key test of an enterprise’s digital maturity.
• Lack of automatic linkage between changes and cost.
• Inability to calculate cost deltas in real time.
• Difficulty in unified evaluation of supplier, process, and material impacts.
• Cost ledger confusion caused by poor version management.
To achieve cost transparency, enterprises must build:
• Cost models that understand change impact.
• Automatic before/after cost delta calculation.
• Cross-department change cost evaluation workflows.
• Cost ledgers recording the source and impact of every change.
This is a key test of an enterprise’s digital maturity.
What value can VAVE (Value Analysis & Value Engineering) truly deliver? Why do many enterprises fail to make it effective?
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The core objectives of VAVE are cost reduction, function preservation, and value enhancement. However, many enterprises struggle to implement it due to:
• Lack of systematic VAVE opportunity identification mechanisms.
• Lack of unified cost data and models to support value analysis.
• Lack of cross-functional collaboration tools.
• Lack of integrated early-design and late-procurement cost improvement mechanisms.
Successful enterprises use digital platforms to enable:
• VAVE opportunity libraries.
• Multi-solution cost comparison.
• Closed-loop cost reduction project management.
• Knowledge retention and reuse.
• Lack of systematic VAVE opportunity identification mechanisms.
• Lack of unified cost data and models to support value analysis.
• Lack of cross-functional collaboration tools.
• Lack of integrated early-design and late-procurement cost improvement mechanisms.
Successful enterprises use digital platforms to enable:
• VAVE opportunity libraries.
• Multi-solution cost comparison.
• Closed-loop cost reduction project management.
• Knowledge retention and reuse.
Specialize for Excellence, Persevere for Success
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Email: contact@gantsoftware.com
Tel: +86 21 58650908
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