Design To Cost And Maximizing Productivity
Management can be defined as the best utilization of available resources. This is quite true in all spheres of the cycle of production and supply chain activities. The available resources for any production unit would be the raw materials and the facilities at the factory or the product manufacturing arena. However, utilizing resources in the best manner is not limited to production or related activities. It should be the ever-present principle that guides the daily functions of all the departments of an organization, whether it is big or small. Even a small sole proprietorship requires management as an inherent part of its processes because otherwise, there will be losses in the long run. For any organization to run smoothly and make profits, understanding the day to day requirements and fixing its long term goals are of paramount importance. Whatever is the product or service that the organization proposes to bring out into the market, it cannot achieve success without proper planning and controlling the use of its available resources.
In this light, one of the latest management trends called design to cost is of great significance. Design to cost turns the processes of financial management and production management upside down. In fact, it is a mixture of all the basic principles of management and production engineering. Rather than fixing a production target, like the total number of a certain product to be produced in a month, and then analyzing the costs that the production would incur, design to cost works by fixing the cost target first and then designing the process of production in such a way that the required number of products can be produced within the cost target. Thus, the two basic steps involved in the design to cost process are:
· Fixing Cost Target – This is where the management of the organization decides how much money it has in its hands and how much it should spend for a particular activity like production. This will enable the organization to have complete control over its finances that it sets apart for the particular activity. Unnecessary expenses can be easily avoided by coordinating the finances in this manner. Before even deciding on how the product or service is to be produced, the management will set to work on how much it is ready to spend on the process. It can help in fixing a cost target for the actual activity and a separate cost target for unforeseen circumstances that may come up.
· Fixing The Design – This is where the managers and engineers meet to decide upon the method or design that they should use to perform an organizational activity like production. They can try out various processes and then finalize upon the one that is the most cost effective as per the cost target. They have to see to it that the activity does not cause any further expenses other than the cost target.
So, it can be seen that design to cost makes the usual processes of management follow a reverse route to maintain the costs of organizational activities like production or marketing at a minimum and thus help increase profits.