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Lean manufacturing enterprises in Japan use confrontational strategies, and this article is a review of those integrated cost management techniques. The survival triplet (cost/price, functionality, and quality) defines the survival zones for successful products. Target costing, value engineering, and interorganizational cost management systems are the three specific cost management techniques to manage the cost of future products.
The target cost is the cost at which the product must be produced to obtain the desired level of profitability. The target cost controls the design because the product must be redesigned, the production processes modified, or the supplier costs reduced until the target cost is obtained. Value engineering is used to drive down the product cost to the target cost while achieving the required product functionality and quality. Interorganizational cost management systems create downward cost pressures on the supplier chain and identify innovative ways to reduce the cost of chain supplied components.
BACKGROUND
Lean manufacturing is a manufacturing philosophy [4] to shorten lead time, reduce waste, and reduce costs, and lean manufacturing enterprises are those that practice the lean manufacturing philosophy. The techniques used to implement lean manufacturing are varied and so are the results, but the customer is pleased with reduced lead times and lower prices. A better definition of lean manufacturing is that it is a manufacturing philosophy to shorten lead times and reduce costs by reducing waste and improving employee performance, skills, and satisfaction. Lean manufacturing is not mean manufacturing. The technique has sometimes been abused by management-by forcing salaried employees to work longer hours, or by cutting benefits of all employees. Lean manufacturing is not a short term process, although some significant cost reductions may be obtained quickly; it is a continuous improvement process that requires employee training, employee involvement, and employee empowerment. Lean manufacturing frequently uses techniques such as just-in-time production, total quality management, total cost management, group technology, concurrent engineering, team-based work arrangements, and supportive supplier-producer-customer relations (supply chain management). The reduction of waste is not only reduced scrap production, but also increased process yields, reduced process queues and inventories, development of new products from product wastes, and the elimination of waste streams that are often very costly.
As global competition becomes more intense, competition has increased among the lean...