1
Osaka University
Prof. Takayuki Asada
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing -
Cost Management, Budgetary Control and Program Management
- Learning from Toyota and Boeing -
Agenda
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
Table Business Strategy Classification
(Business Strategy)
Busines Strategy
(Resource Strategy)
(Competitive Strategy)
Competitive Strategy
Resource Based Strategy
Competitive Positioning
Operational Efficiency
to decide what not to do.
to set up a kind of unique
position.
differentiation
core competence
Key Factor for Success
Uniqueness
make something smarter than
another firms
6-sigma
To search operating
efficinency
From [Link] Two Japans(from lectures in Japan
Competitive Strategy
Strategic Positioning
According to [Link], Business Strategy divided into Competitive
Strategy and Resource Strategy.
Competitive Strategy is divided into Operational Efficiency and Strategic
Positioning.
Resource Based Strategy Is related to M&A,Spin-Off, Curve-Out and IPO.
Operational efficiency is achieved by TQM, JIT and ABM(Activity Based
Management).
Strategic Positioning is explained here as the most important strategy with
Strategic Cost Management.( Some points are studied by Otley and
Govindarjan and Gupta.)
Competitive Strategy
Strategic Positioning(2)
1.
Old Model efficiency :
Operating Efficiency was best way for Japanese.
Japanese Corporations ,which developed and used
VA/CD (purchasing), QC (small team activities for product quality
control), TQM, JIT (Just in Time, Kanban) and line efficiency.
2.
New Model (Value and Focusing
What to drive value and What to focus
Focusing into his strong field and getting an unique position in
competitive markets and try to implement strategic project
management in R&D and Marketing.
To use cooperative relationship between Organizations as a kind of
competitive levers.
Competitive Strategy
Strategic positioning (3)
To win competitive strategy ,Mission and program are very important.
According to mission, you must allocate economic resource into business
units.
However, there are not clear relationship between mission and goals.
Japanese companies try to use Balanced Score Card (New Hoshin
Management) for checking the effectiveness of project and programs
(Customers satisfaction, stockowners as well as Employees
Satisfaction).
Hoshin management was useful for line commitment to implement Kaizen
management but no good for strategic program or projects Evaluations.
(Asada,Bailes and Suzuki(2001))
Because Hoshin management has not value measurement for checking
project success or not.
We try to use Program & Project Balanced Score Card for New Hoshin
Management(P2BSC).
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
Value Chain and Evaluations (1)
Intra-organization
1) Basic Point of View
Activities can be divided into Direct activity and Indirect Activities.
Direct activities consist of operation, inbound logistics, outbound logistics
and sales.
In-direct activities consist of purchasing, technology development, human
resource management, general administrations.
Pay attention to cost and value in each process from the viewpoint of
competitive advantage.
2)Value Chain Concepts are starting points for Strategic Cost Management.
Because We focus into Strategic Core capability development for realizing
strong market Positions through Target Cost Management.
10
2 Value Chain and Evaluations (2)
Value Chain consists of both intra-organization and between organizations.
2) Intra-Organization: How to evaluate a series of processes?
Activity, Costs and Resource Drivers in one business unit or in one company.
Drivers can be divided into Structural and Operational drivers. Most of drivers
for efficiency is operational driver. For example, production hours, defect
rates, set-up-time, multi-job level for each employee, capacity of production.
However,we focus into Structural drivers for realizing desired market position.
Some important drivers are product architecture(designing), Technology
drivers and Market driven drivers(target cost or target price).
(Strategic Map)
So, we can distinguish structural drivers and operating (activity) drivers and
we must construct meaningful relationship between such drivers..
(Program and Project Management Framework)
These drivers relationships are linked by Program & Project Balanced
Score Card.
11
2 Value Chain and Evaluations (3)
3) Between organizations: total effects of Q,D,C between organizations
are used for competing to other enterprises group.
There are three types of inter-organization value management.
1.
value chain based on capital mutual share (Keiretu:Vertical relationships).
Matushita Group, Toyota Group, Toshiba Group, Airbus
2. value chain based on Market contract base.
Boeing Supply Chains, Dell Computer Demand Chains
[Link] Based Network (Cooperation and Competition).
Alliance between Wall-mart and P&G(demand chain)
Alliance between GM and Toyota(production)
Alliance between Matsushita and Toyota Group (Liquid-Battery)
12
2 Value Chain and Evaluations (4)
4) There are no clear and robust methods for evaluating Interorganizations.
However,Positioning Strategy are closely related with this new ideas:
Learning network between Firms.
Looking back to Japan Toyota, Basic Value of doing
Business are put emphasized by most of managers.
Trust between top-managements in different companies are essential
for strategic learning.
R&D alliances for new cars development are done between Toyota
and Matsushita.
13
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
14
Two kinds of Cost Management
Traditional cost management and Strategic cost management
T-1) Traditional cost management focus into direct activities.
S-1) Strategic cost management focus into value chain.
T-2) Traditional cost management focus into continuous improvement of
direct activities.
S-2) Strategic cost management focus into total through-put between
organizations chain and total value chain.
T-3) Traditional cost management make use of team circle activities.
S-3) Strategic cost management use project management and new Hoshin
Management. So,breaking the traditional intra and inter organizational
walls for realizing customers value satisfaction.
15
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
16
Project and Cost Management
In enterprise project management, Cost Management is very useful for
Keeping standard costs ,realizing Kaizen costing and implementing Target
costing for new products and services producing.
Target Costing is especially applied into product development and new
project.
Cooper and Slagmulder Insisted,Japanese Target Costing is applied as
Confrontation Strategy,but this is useful for all of industry in today global
market.
Boeing have faced new strong competitor from Europe and also face new
competition as a deregulations. He try to use Target Costing and Program
Management.
Toyota must step up from Kaizen of production systems with continuous
improvement and must make break-through in front-end stage in 1965.
17
Structure of Cost Management Systems
Target costing:
project management and strategic product & service cost management
Kaizen costing:
small circle management, continuous improvement. delete non-added
value process
Cost keeping:
variance analysis and keeping standards
Monden(1995)
Monden and Hamada(1991)
18
(Table2) Target Costing and Kaizen / Cost keeping
Cost
Actual costs
Cost variances
Standard
Costs
Target costing effects
Cost keeping effects
New
Standard
Costs
Kaizen Costing
Old product model
Target of cost
reduction
New product model
Time
19
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
20
Target Costing
Target Costing is one of Strategic cost management which applies into
the development and designing processes of products or services.
Target costing is a set of tools for cost reductions at the product
development stage with using VE and QFD to realize target profits
under the competitive market prices.
Target Costing is one of DNA for new project management (P2M)in
Japanese enterprise.
Target Costing is very different from Kaizen Costing and Cost Keeping
because these (Kaizen and Cost Keeping) management focus on
production processes and rather R&D processes.
Product life cycle become short,and Target costing is necessary logics for
keeping market competitiveness.
21
(Table 4) Some comparisons between Target Costing, Kaizen
costing
and Cost
keeping
Objective and contents of Cost
Cost management
phase
Management
Target Costing
The Stage of Product
Development or Service
Designing.
Realizing a firms middle
range or long-range profit by
achieving Target Costs.
>Structural change of
[Link] through
VE(value Engineering)
The role as Management
Accounting
Cost Estimating for each new
product,product family and each
parts of such a product.
>Milestone Management of Target
Cost by means of Cost Estimating.
>Economic Evaluation about facility
or Capital Assets for MFG. And
Logistics.
>Setting Each Product Standard
Costs
Cost Keeping
The stage of Product
Manufacturing or service
Implementations
Controlling Actual Costsin
conformance with Standard
Costs.
Small scale continuous
improvement to realize
Standard Costswithout
changing [Link]
Kaizen Costing
The Stage of Product
Manufacturing or service
implementations.
Achieving Cost Reduction Target
for realizing Corporate Profit Plan.
(Continuous improvement for
Current standard Cost reduction.
VE,TQC and JIT
Making Analysis of Variance
between Actual Costs and
Standard Costs under
process Based Standard
Costing.
Assigning target of cost
reduction into each
[Link] through
budgetary control.
(Overhead Cost Reduction)
22
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
23
Target Costing and Project Management
Japanese Enterprises (2002 Research in Japan)
Management
Strategy and
Environment
Strategic
project
Organization
Measurement
Implementa
tion
IT supports
performance
Performance
Target
Costing
Cost
Estimating
IT Systems
24
The results from a research, 2002
Task complex problems are not able to evaluate by means of money
only and 143 returned,13.8%) in September 2002.
Average figure of respondents:
Average Sales volume: 0 Billion Yen Total Employees:300
1.
What kind of strategy such companies do?
No.1 product development 1.2 Score
No.2 New Employment Systems 1.0 Score
No.3 Business Organization Transformation 0.9 Score
No.4 Market Development 0.8 Score
No.5 New Management Systems 0.7 Score
2.
How to evaluate each project performance?
No.1 monetary basis (sales, profits) 1.2 score
No.2 Monetary basis (amount of cost reduction) 0.5 score
No.3 The non-financial evaluation of seeds to be gained, the development
of human resources others measures
(3
items are the same rank).
25
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
26
Project management in Boeing and Toyota
Boeing use target costing for new program of B777 in 1990.
Toyota originally produced Target Cost Management for new product programs in 1965.
Target Cost Management are developed in Japan, but such ideas are distributed into other
western countries from Japanese automobile in 1980.
There are several kind of versions about Target Cost Management.
Typical interesting one is produced from CAM-I(computer Aided Manufacturing International,in
Texas). Such model is applied into Boeing and Crysler.
Most critical differences between Boeing and Toyota is the degree of fusion between Human
being and Technology.
Toyota target Cost Management is developed step by step base depending on the level of
human-learning.
However,Boeing and USA model is based on technology driven.
For example, Toyota completely adopted data-base of Target costing in around1998,
but in Boeing. Such data base is initially developed with introducing CAD/CAE (CATIA) in around
1987.
27
Target Cost Management Process
Process Overview - Establishment Phase
Market
Research
Market
Price
Define Product/
Customer Niche
Understand
Customer
Requirements
Target
Cost
Define
Product
Features
Required
Profit
Competitive
Analysis
The target cost is the allowable amount of cost that can be incurred
on a product and still earn the required profit from that product.
28
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
29
Boeing Target Cost Management
Team ideas are developed. (DBT)
T are used for knowledge and information sharing with members of teams. (Network of CAD)
Costs are divided into two groups.
Recurring and non-recurring.
Internal and external benchmarking.
Outsourcing with the enlargement of make or buy.
30
Total Cost Management: Market target Costing (Boeing)
Market Research
Product Positioning
Product Characteristics
Target Price
Less
Target Profit
Product target Cost
Produce Target Costs for Responsibility Centers
Responsibility centers
Responsibility Centers
Doors
Return target costs
Wings
Fuselage
31
Boeing: Target Allocation Considerations
Scope
Program
Total Dollars
Non-Recurring Cost
Recurring Cost (first 5 yrs. & total)
Teams
All cost aligned with IPT structure (excl. G&A)
IPT is larger set of DBTs concept
IPT Members
All functional organizations represented
All partners linked (Wichita, Fab, WRC Materiel etc.)
Data
IPT Level II/III
Target allocations
Drifting Cost
Actual
Potentials
Cost Driver (IV, V & lower
Value Chain
Customer / Supplier - TBD
32
Target Allocation Considerations
Linkage to the Customer
CUSTOMER FEATURES
Personal
Computer
Example
PRODUCT FUNCTIONS
Software executes rapidly
Microprocessor
Ample disk storage space
Power supply
Allows multi-tasking
Case
Screen refresh rate is fast
Memory
Appearance (sleek v. clunky)
Hard Disk
Runs graphics applications
Bus
33
Target Allocation Considerations
Equal Challenge vs. Equal Reduction
Spreading the Cost Reduction results in:
Functional Estimate Padding
Disincentive to set aggressive plans
No reward for the cost/risk taker
Hiding performance problems
Limiting process improvements
34
Methodology
Section Outline
Linkage to customer requirements
Capability Leveraging
35
Linkage to Customer Requirements
QFD Approach
Customer requirements
Estimated cost distribution
Correlation of requirements to components (QFD)
Evaluation of Value Index
Target setting to value
We teach this MDTC principle to help IPTs focus cost reduction on
value matching
36
Capability Leveraging
Target Allocations with Internal Benchmarking
Approach Overview
Utilize historical program comparisons to determine
leverage areas for decomposing product level target cost.
Methodology
100% implant equivalent
Theoretical #1 for production
Size all program comparisons to target program size
Production material normalized in constant year dollars
Cost Elements
DESIGN ENGINEERING
PERFORMANCE ANALYSIS
ENGINEERING ADMIN
CENTRAL ENGINEERING
ENGINEERING COMPUTING
CUSTOMER SUPPORT
TOOL & PRODUCTION PLANNING
PLANNING COMPUTING
SALVAGE
MR&D
DEVELOPMENTAL TEST LABOR
DEVELOPMENTAL MATERIAL
DEVELOPMENTAL MOCKUP LABOR
MOCKUP MATERIAL
QUALITY CONTROL
INITIAL TOOL FAB LABOR
TOOL DESIGN LABOR
RATE TOOLING LABOR
TOOLING MATERIAL
TOOL COMPUTING
PURCHASED EQUIPMENT
STATIC, FATIGUE & FLIGHT TEST
PRODUCTION LABOR
PRODUCTION MATERIAL
OTHER DIRECT CHARGES
OVERHEAD
FRINGE
GENERAL & ADMINISTRATIVE
VERTICAL TAIL FIXED TRAILING EDGE
VERTICAL TAIL LEADING EDGE
VERTICAL TAIL FIN TIP
RUDDER
HORIZONTAL TAIL CENTER SECTION
HORIZONTAL TAIL BOX
HORIZONTAL TAIL FIXED TRAILING EDGE
HORIZONTAL TAIL LEADING EDGE
HORIZONTAL TAIL TIP
ELEVATOR
ENVIRONMENTAL CONTROL SYSTEM
AVIONIC SYSTEM
FLIGHT DECK
FLIGHT MANAGEMENT SYSTEM
CONTROLS
HYDRAULICS
ELECTRICAL
STRUT & SYSTEMS
NACELLE
THRUST REVERSER
ENGINE BUILDUP
FUEL SYSTEMS
APU
PASSENGER ACCOMMODATIONS
CARGO SYSTEM
WING CENTER SECTION
WING OUTBOARD
FIXED TRAILING EDGE
INBOARD TRAILING EDGE MOVABLE
OUTBOARD TRAILING EDGE MOVABLE
SPOILERS
AILERONS
MLG DOOR
INBOARD FIXED LEADING EDGE
OUTBOARD FIXED LEADING EDGE
INBOARD LEADING EDGE MOVABLE
OUTBOARD LEADING EDGE MOVABLE
WING TIP
SECTION 41
SECTION 43
SECTION 44
SECTION 45
SECTION 46
SECTION 48
SECTION 49
MAIN LANDING GEAR
NOSE LANDING GEAR
VERTICAL TAIL BOX
37
Capability Leveraging
Cost Analysis System
Product Breakdown (WBS)
DEVELOP PARA-DETAIL
COST ESTIMATING RELATIONSHIPS
(CER's)
LABOR RATES
SUPPORT LABOR FACTORS
THEORETICAL # 1's
LEARNING CURVES
ETC.
IDENTICAL
NEW
COMMON
SIMILAR
ADJUST
FOR
OPERATING
GROUP
PROGRAM
INITIATIVES
ADJUST
FOR
STATEMENT
OF
WORK
UNIQUENESS
38
The CAM-I Process
Target Costing Process
EXPERTISE
REQUIRED
Product Strategy &
Profit Plans
Product Design & Development
Product Concept & Feasibility
Production & Logistics
Voice of The C ustomer
Establish &
Strategic
Deploy
Product & Profit Business
Planning
Strategies
Sales &
Marketing
Product Planning
Develop
Portfolio Profit
Plans
Define
Product
Strategy
Define Product
Line Size/
Share
Objectives
Set
Margin /
Price Goals
Gate
Gate
Gate
Define
Product
Concept
Establish Technology Plan
Analyze
Customer/
Competition
Define
Investment
Required
Confirm
Concept
Feasibility
Prepare
Development
Plan
Finalize
Design
Technology
Planning
Product Design
Process Design
Estimate
Product /
Process
Costs
Validate
Design
Continue
Value
Engineering
Review/
Update
Status
Confirm
Suppliers
Manufacturing Team
Manage
Continuous
Improvement
Initiate
Value
Engineering
Cost Estimating
Procurement
Implement
Sales /
Distribution /
Service Plan
Plan
Validate Production
Process System
Suppliers / Extended Enterprise
Implement
Sales /
Distribution /
Service
Plan
Launch
Production
Monitor
Customer
Preference
&
Competition
Continuously
Measure
& Evaluate
Results
Against
QCT
39
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
40
Toyota Target Cost Management
Process Over-lap idea between the teams
Each Process Overlap produces the sharing of information and
knowledge between members of teams
Costs are divided into two groups: Direct Costs and Indirect Costs
External Benchmarking and Policy management are developed for
Direct Cost reductions
QFD and VE/VA are used so much in concrete development processes
of new product .
41
Japanese Target Cost Management
General Planning Each New Product Planning New Product Basic Development Plans Product Design
Production
Manag Planni
ng Office
Middle
Range
Plans
COST
Planning&Cont
-rol Office
Product
Planning
Office
Designing
Cost Planning
Office
Purchasing
Office
Production
Engineering
Department
Target
Profit
Setting
Target
Costing
Process
Evaluation
Market
Research
Middle
range
Sales
Plans
Marketing
of New
Products
Product
Manager
Production Transfer
New
General
Product
Plans
New
Product
Plans
Market
Price
Target
Price
New Product
Development
Plan
Target
Order of
Setting for
Development
Costs and
Specifications
Profit
Realization
Checking
Parts
And
Functional
Parts
Develop
-ment
Of
Target
Costs
Test
design
Goals
Assurance
VE
VE
Cost
Estimating
Final Cost
Design Estimate
Co
Cost
st
Improve
-ment
Im
pr
ov
e
42
The Evolution of Target Cost Management:
Toyota Target Cost management developed from single model management
to multi or program-project management.
Program and Project
Multi Project Management
No explicit coordination between each project
Functional Organizations for product
development
New project 1
New project 1
New Project 2
New Project 2
New Project 3
New project 3
Project
Manager
Program office
Platform integration
43
Cost Management, Budgetary Control
and Program Management
- Learning from Toyota and Boeing 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Competitive Strategy
Value Chain and Evaluations
Two kinds of Cost Analysis
Project and Cost Management
Target Costing
Target Costing and Project Management
Project Management in Toyota and Boeing
Boeing Target Cost Management
Toyota Target Cost Management
Target Cost Management tools
44
Target Cost Management Tools: Linkage to Customer Requirements
Coffee Maker Components
DRIVE SHAFT
LID RELEASE
WELL LID
BREW BASKET LID
BLADE
BREW BASKET
FILTER
GEAR
BASKET BASE
WATER LEVEL
INDICATOR
PLUG
CORD
BODY
BREW
BASKET
ASSEMBLY
WATER TAP ARM
WATER WELL
CARAFE LID
GLASS CARAFE
HANDLE
WARMER
COFFEE BEAN
MEASURE
45
Linkage to Customer Requirements
Customer Requirements
Customer Ranking
1
Not
Important
Coffee tastes and smells like Espresso
Coffee maker is easy to clean
Looks nice
Has 6+ cup capacity
Starts automatically at designated time
Works well with different coffee beans
Keeps the coffee warm
Automatically shuts off
Total
Relative
Ranking
5
In
Very Percent
Important
5
4
2
3
4
1
3
3
20%
16%
8%
12%
16%
4%
12%
12%
100%
46
Linkage to Customer Requirements
Components or
Functions
Customer
Requirements
Tastes/smells like
Espresso
Easy to clean
Looks nice
Has 6+ cup capacity
Starts automatically on
time
Works with different
beans
Keeps the coffee warm
Automatic shutoff
Brew
Basket
Carafe
Coffee
Warmer
Body/
Water
Well
(.5)
(.3)
Heating
Element
Display
Panel
(.5)
(.1)
(.6)
(.6)
(.5)
(.5)
(.05)
(.2)
20%
(1.0)
16%
8%
12%
16%
(.95)
4%
(1.0)
12%
12%
(.4)
(.8)
Correlation of design parameters and customer requirements:
= Strong Correlation
= Moderate Correlation
Relative
Feature
Ranking
= Weak Correlation
47
Linkage to Customer Requirements
Component
Customer
Requirements
Tastes/smells like Espresso
Easy to clean
Brew
Basket
Carafe
Coffee
Warmer
Body/
Water
Well
.50*20=10
Heating
Element
.50*20=10
.30 *16= 4.8 .10 *16= 1.6
16%
.60 *8= 4.8
.50*12= 6.
.40*8= 3.2
.50*12= 6
.05*4= 0.2
Keeps the coffee warm
1.00*16= 16
16%
.95*4= 3.8
4%
.20*12= 2.4 .80*12= 9.6
12%
Automatic shutoff
Converted Component Ranking
15.0
10.0
9.6
8%
12%
Starts automatically on time
Has multiple grinder settings
Relative
Feature
Ranking
20%
.60* 16=9.6
Looks nice
Has 6+ cup capacity
Display
Panel
20.4
10.0
1.00*12= 12
12%
35.0
100%
48
Linkage to Customer Requirements
Component or Function
Brew Basket
Carafe
Coffee Warmer
Body Shape and Water Well
Heating Element
Electronic Display Panel
Component
Cost
(% of total)
20
5
7
18
10
40
100%
Relative
Importance
(in %)
15.0
10.0
9.6
20.4
10.0
35.0
100%
Value Index
(Col 32)
Suggestions
0.75
2.00
1.37
1.13
1.00
0.88
simplify shape to reduce processing cost
enlarge capacity
modify shape to enhance warming & cleaning
O.K. (could consider material change)
O.K.
select standard electronic components
49
Linkage to Customer Requirements
Value Index Chart
Relative Cost (%)
Electronic Display Panel
Reduce Cost
a
im
t
Op
e
on
Z
lue
a
lV
Brew Basket
Body shape & Water Well
Heating Element
Coffee Warmer
Carafe
Relative Importance (%)
Enhance
50
Linkage to Customer Requirements
MAJOR COMPONENT
FUNCTION
brew basket ---------------------------> grinds & filters coffee
carafe -----------------------------------> holds and keeps coffee warm
COST
$10.00 ( 20%)
2.50
( 5%)
coffee warmer ------------------------> keeps coffee warm
3.50
( 7%)
body shape and water well --------> holds water and encasement
9.00
( 18%)
heating element ----------------------> warms water and pushes it
electronic display panel ------------> controls brew & clock settings
5.00 ( 10%)
20.00 ( 40%)
$50.00 (100%)
51
END
