Tactical Planning - Cost Targets
Effectiveness and efficiency of operations
A. Personnel are committed to the process of establishing and achieving cost targets.
- Are performance measures relevant, achievable, and set at the level that achieves the objective of cost control?
- Have recognition and rewards been linked to achievement of performance measures and to the success of the service being developed?
- Do all personnel understand the target costing process and are they knowledgeable about such factors as qualities of the service, desired market share, desired profit, maximum allowable cost, and necessary steps to achieve that cost?
B. Cost targets are consistent with market demands and University strategy.
- Have target costs been established prior to service design and development and represent the desired service cost on the first day of normal delivery?
- Has responsibility for service cost and customer satisfaction assigned to the same individual? Does this person have an in-depth understanding of both the service and the target customer?
- Are performance measures used that impact compensation and advancement to focus the assigned individual on achieving desirable results?
- Is value engineering used throughout the development process to achieve target costs? (Value engineering is an activity used to reduce costs without loss of service performance.)
- Has extensive cost-estimating data that reflects actual processing, parts, and material costs been developed, maintained, and made accessible to personnel?
- Is the protected database integrated to make it useful to multiple functions, such as planning, accounting, and marketing?
- Are personnel cross-trained to perform financial analysis? This allows for decentralized cost-estimating skills within organizational units where estimates are required.
- Is a consistent approach and planning format for capital investment planning used? This allows comparison of information from project to project.
C. Management involves suppliers in the target costing process.
- Are suppliers involved early in the service development process (design stage) to allow the University and supplier to work toward common objectives?
- Are suppliers worked with to create joint performance measures that provide incentives
for quality, reliability, and improvements?