Product cost protection shield for supplier

© 2015 Mieschke Hofmann und Partner Gesellschaft für Management- und IT-Beratung mbH

Strike back: Process driven target result costing approach by

MHP

Product cost protection shield for Supplier

Michael Kirchgässner and Fabian Kehle l MHPBoxenstopp 07.07.2015

© 2015 Mieschke Hofmann und Partner Gesellschaft für Management- und IT-Beratung mbH 2

MHPBoxenstopp: Product cost protection shield for Supplier

Your interlocutor

Fabian Kehle

Senior Professional

SU Product &

Innovationsmanagement

Michael Kirchgässner

Associated Partner

SU Product Life Cycle

Management


14.07.2015 Instandhaltung mit HANA Mehrwert + Einsatzszenarien der inMemory Datenbank

21.07.2015 Die MHP Supercharge EDI Strategie Was ist Supercharge EDI und wie kann die MHP EDI Solution hierbei

unterstützen?

28.07.2015 SAP Cloud for Planning Einblicke in die Planungslösung der Zukunft?!

Introduction


www.youtube.de/MHPProzesslieferant

Further MHPBoxenstopps

Agenda

www.mhp.com/events

At the beginning all participants are set to mute

www.mhp.com/de/events

13.00 – 13.10 pm Welcome Fabian Kehle

13.10 – 13.45 pm Lecture Michael Kirchgässner

13.45 – 14.00 pm Open Q&A session You can also submit questions during the web session via chat

function in the right panel.

www.slideshare.net/MHPInsights

http://www.mhp.com/de/events/aktuell/ ?utm_source=mhpboxenstopp&utm_medium=e-mail&utm_campaign=Unterlagen_September

http://www.youtube.com/MHPProzesslieferant

http://www.mhp.com/de/events/aktuell/ ?utm_source=mhpboxenstopp&utm_medium=e-mail&utm_campaign=Unterlagen_September

http://www.mhp.com/de/events/detail/instandhaltung-mit-hana-14-07-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-024

http://www.mhp.com/de/events/detail/big-data-strategy-28-01-2014/ ?utm_source=mhpboxenstopp&utm_medium=e-mail&utm_campaign=Unterlagen_Januar

http://de.slideshare.net/MHPInsights

http://www.mhp.com/de/events/detail/die-mhp-supercharge-edi-strategie-21-07-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-025

http://www.mhp.com/de/events/detail/sap-cloud-for-planning-09-06-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-026


Processes can be improved only by those who are familiar with both the smallest details and

the overall picture


We know from experience how goals are achieved

and how to get there ahead of everyone else


Mieschke Hofmann und Partner (MHP)

A Porsche Company


The Performance Management Consulting

System Integration

Application Management

Business Solutions

The Difference

Symbiosis of Process + IT Consulting l Process supplier l Excellence l Automotive l Customers

The Competence Comprehensive consulting portfolio across the entire value chain

Technology

Services

Application

Mgmt.

Services

Product

Lifecycle

Mgmt.

Supply

Chain

Mgmt.

Production

& Opera-tions

Mgmt.

Customer

Relations

Mgmt.

Finance &

Controlling

Business

Intelligence

After

Sales

Retail

Mgmt.

Human

Resources


Comprehensive consulting portfolio across the entire value chain.

Our Competence with topics


Technology

Services

Application

Mgmt.

Services

Product

Lifecycle

Mgmt.

Supply

Chain

Mgmt.

Production

& Operations

Mgmt.

Customer

Relations

Mgmt.

Finance &

Controlling

Business

Intelligence

After

Sales

Retail

Mgmt.

Human

Resources

Production

Planning

Strategic

Production

Consulting

Lean Production

Manufacturing

Execution

Maintenance

Retail Service

Management

Retail Consulting

Fleet Management

Sourcing

Planning

Affiliation

Performance

Development &

Talent

Management

Governance, Risk

and Compliance

Template

Development and

Rollouts

Business Process

Development &

Optimization

Legal and Fiscal

Requirements

Accounts,

Reporting and

Consolidation

System

Harmonization

CIO Management

Consulting

Enterprise Content

Management

Standard Software

Individual Software

Application &

Process Services

Application

Management

Consulting

Product Structure

Management

Product

Development

Process (PDP)

Management

SAP PLM Consulting

& Solution

Implementation

PTC Windchill

Solution

Integration

DS Enovia V6

Solution

Integration

PLM Strategy &

Management

Consulting

Production

Logistics

Procurement &

Quality

Sales Logistics

Service

Management

Spare Parts

Management

Supply Chain &

Demand Planning

Service

Management

Spare Parts

Management

Warranty

Processes

(Pro-active)

Complaint

Management

Digital incl.

Connected CRM &

Social CRM

CRM Strategy &

Management

Consulting

Sales Force

Automation incl.

Mobile CRM

Analytics incl.

Segmentation &

Campaign

Management

Vertical Retail

Integration

(Pro-active)

Complaint

Management

BI Technology

BI Strategy

Integrated

Corporate

Planning

Analytical Business

Processes

Next Generation BI

& BIG DATA

Mobile BI

Scenarios

CRM IT Consulting

& Solution

Implementation

Transition &

Change

Management

Administrative

Core Processes

MHP Dealer

Performance

Management

Finance and

Controlling for

Automotive Retailers

Dealer

Management

Systems

MHP Carbon

Innovations Connected Vehicle Sustainable

Mobility Real-time Business Industry 4.0

Product cost

protection shield

Agenda


1. Point of Departure / Challenges

2. Set of means against total subjection

3. Comprehensive product cost management

4. Summary & discussion

Agenda






9 © 2015 Mieschke Hofmann und Partner Gesellschaft für Management- und IT-Beratung mbH

Yesterday….

Today!

Drifting Roles – Times are changing


Prices were provided by the supplier Prices are dictated by the customer


Today's purchasing:

profit enabler

powerful management member

high training budget

high cost awereness

usage of management tools

Knowledge-based state-of-the-art purchasing

– root of change?


product cost structure analysis

open-book accounting

e-auctions

global sourcing

target costing

collaboration


Challenges which are faced by suppliers are manifold


Supplier's

Product Cost

Global competition

Prices dictated by the OEM

Increasing cost

pressure

Shorter product and technology

cycles

Change in cost structures

Higher Logistic Cost

R&D Activities

Higher HR cost

Higher raw material cost

Reduced Margins

Price pressure due to intense

competition


Dramatic Implications by ignoring challenges


Total

comparability

with other

suppliers Loss of

negotiation

power

Reduction of

profit margins

Struggle for

survival

Agenda







Protective Shields for suppliers – enabled by MHP


Selective Open-Book Accounting

Benchmarking

Target Result Management

OEM

There are other options than total subjection!

Comprehensive

Product

Cost

Management


Target Result Management – Target Definition is key


DCF

EBIT

cost structure

KPI indication

gap between

current KPIs

and target

KPIs

identification

of potential

modifications

definition of

targets based

on previous

steps

target KPI

definition by top

management

Initial

calculation target delta

chance &

risk analysis

target

splitting

target

definition

splitting of

target into

functional

specific goals


Target Result Management - Overview


Mo

nit

ori

ng

Pro

cess

Targ

et

Defi

nit

ion

Pro

cess

Co

stin

g a

nd

Pri

cin

g P

roce

ss

Result Targets

• customer change request management

• pricing actions

Target Definition

• project

• functional goals

calculation of cost

sales price definition

result determination &

monitoring of

achievements

purchasing

production

R&D

logistics

sales

• production cost

• tooling cost

• investment cost

• one-time cost

• price margin

• discounted cash-flow

• customer reimbursement

Operations

Cost Targets

• purchasing price analysis

• design to cost

• product modifications

Operations



1 n 2 t

SOP EOP

Calculation t=1

Volume1

cost rates

purchasing prices

overheads

Ø Product HKt=1

(for volume1)

Calculation t=2

Volume2

cost rates

purchasing prices

overheads

Ø Product HKt=2

(for volume2)

Calculation t=n

Volumen

cost rates

purchasing prices

overheads

Ø Product HKt=n

(for volumen)

Target Result Management – Accuracy by Lifecycle Costing

Total Lifetime Manufacturing Cost (MC):

Ø Product MCLifetime = Ø 𝑷𝒓𝒐𝒅𝒖𝒄𝒕 𝑴𝑪𝒕×𝑽𝒐𝒍𝒖𝒎𝒆𝒕𝟏𝒏

𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒇𝒆𝒕𝒊𝒎𝒆 𝑽𝒐𝒍𝒖𝒎𝒆


Target Result Management – Chance and Risk Analysis as Tool


Detailed Overview about potential effects on KPI's including probability

Cross-

functional

workshops

Evaluation of

probability

(chance)

Determination

of cost per

piece effect

Split into

functions

Calculation of

effect on KPIs


Target Result Management – Monitoring is Must-Have


IT tool support

excellent calculation

parameter quality

defined monitoring process

defined responsibilities

cross-functional input

Requirements

Target Delta Determination

calculation current KPI

comparison with target KPIs

determination delta

Chance/ Risk Analysis

idea workshop

qualification

evaluation / calculation

Definitions of Actions

selection and prioritization

splitting into functional

subprojects

Exceution

execution of the selected

actions

realization of the functional

subprojects


Selective open-book accounting – supplier view


Supplier

View

OEM

Expectation Quotation

Transparency of actual cost and cost drivers

cost parameters are based on

suppliers controlling inputs

consideration of companies'

specifics & conditions (e.g. headcount, utilization rate, OH)

calculation by using supplier's

cost structure and calculation

method


Selective open-book accounting – OEM expectations


Supplier

View

OEM


Based on benchmark data OEM's requires unrealistic cost savings

cost parameters are based on

international benchmark data

consideration of best-in-class

processes and conditions (e.g. utilization rate, OH, low-cost)

calculation by standard

calculation scheme (OEM specific cost-break-downs)


Selective open-book accounting – matching approach


Supplier

View

OEM


Matching of own cost structure with OEM expectation by

defined process supported by customized IT tools

transfer of supplier's internal

calculation into OEM standard

calculation scheme

adjustment of calculation

parameters in order to include

all costs (e.g. cycle time, logistic costs, machine

hour rate, OH)

negotiation with OEM based

on facts and IT tool know-how


Benchmarking – Goal oriented processes


Product

Comparison

Features

Performance

Cost

Benchmark

Product Cost

Best of

Benchmark

Process

Benchmark

Production

Processes

Make or Buy

Location

Benchmark

Locational Cost

Productivity

Patent

Analysis

Intellectual

property rights

Agenda







The combination of tools, processes and strategy is key to success


we

After Market

Return

Target

Profit

Cost

Optimization

Cost

Functions

Cost

Benchmarking

Development

Costs

Procurement

Costs

Product

Design Cost

Estimate

Cost

Engineering

Target

Costing

Operating

Costs

Production

Costs

Market Price

Consideration

Cost

Structure

Value Analysis

Cost

Engineering

Ben

ch

mark

ing


MHP Comprehensive Product Cost Management Approach

3. Comprehensive product cost management C

on

sult

ing

Dep

th

MHP IT Consulting (particularly technical MHP Service Units

supported by all SUs)

MHP Process Consulting (all MHP Service Units involved)

MHP Management Consulting (all MHP Service Units involved)

Pro

cess

es

Meth

od

s Syst

em

s Str

ate

gy

2

Range of Competences 1

Comprehensive

Product Cost Management


MHP Comprehensive Product Cost Management delivers costing


MHP Comprehensive Product Cost Management

Holistic, transformational and value-driven. Securing profitability. Ensuring a competitive cost position,

consistent cost transparency and structures as well as identification of cost drivers according to Best-Practice.

The Strategic Orientation is the starting point for all further activities

IT Systems

Applying innovative technologies to open up new possibilities.

Strategic effects of technologies on the business.

Key Performance Indicators

Transparency about all significant

information. Providing tools

and methods to steer and

manage the business.

Processes & Organization

Aligning processes and

organization to strategic goals

and supporting technologies.


MHP Services and Deliverables - Overview


Comprehensive Product Cost Management

Business Strategy

Alignment Target Result

Management

Lifecycle Costing Benchmarking IT Tools

Status Quo Analysis

Fit- / Gap Analysis

Concept Design

Roadmap Definition

Change Management

Process Definition

Process Roll-Out

IT Implementation

Chance and Risk

Analysis

Cost Monitoring

Function Cost Analysis

Process Definition

Process Roll-Out

IT Implementation

Cost Monitoring

Management

Dashboard

Contract Advisory

Negotiation Support

Reporting

Defined Process

Product Benchmark

Cost Benchmark

Idea creation

Workshops

Specification

Testing

Customizing

Roll-Out

Training

Challenging

Agenda







Summary


MHP Comprehensive Product Cost Management is

providing means in order to set-up state-of the art costing

and face todays OEM's

business situation for suppliers is changing

OEM purchasing organizations' cost awareness is high

not only cost are essential but result-oriented KPIs as well

target definition is necessary in order to remain profitable

accurate product lifecycle costing is required to provide cost information

multi-functional costing process reveals cost transparency of own product

benchmark and other tools are means in order to reduce cost

Challenge

Requirements

Means


Outlook


Comprehensive product

cost management is key

to success!

due to megatrends

product costing

demands will

change

OEM's will develop

new purchasing

tools

costing will

become more and

more important

only companies

which are ready to

face future

challenges will

survive

32 © 2015 Mieschke Hofmann und Partner Gesellschaft für Management- und IT-Beratung mbH

Your contact partners


Michael Kirchgässner

Associated Partner

SU Product Life Cycle Management

Mobile: +49 151 4066 7774

E-Mail: [email protected]

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MHPTimetable

Further

information

MHPBoxenstopp

Instandhaltung mit

HANA

11-12 Uhr | 14.07.15

MHPBoxenstopp Product cost

protection shield for

Supplier

13-14 Uhr | 07.07.15

www.mhp.com/

events

With just one “click” to the MHPBoxenstopp application

MHPBoxenstopp SAP Cloud for

Planning

11-12 Uhr | 28.07.15

Did you miss a MHPBoxenstopp? No problem – you can find all recent web sessions on our MHP YouTube channel and our

SlideShare profile:

Recordings and videos in the channel: Presentation documents:

http://www.youtube.com/MHPProzesslieferant http://de.slideshare.net/MHPInsights

MHPBoxenstopp Die MHP Supercharge

EDI Strategie

13-14 Uhr | 21.07.15

http://www.mhp.com/events

http://www.mhp.com/de/events/detail/product-cost-protection-shield-for-supplier-07-07-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-023

http://www.mhp.com/events

http://www.mhp.com/de/events/aktuell/ ?utm_source=mhpboxenstopp&utm_medium=e-mail&utm_campaign=Unterlagen_Februar

http://www.mhp.com/de/events/aktuell/ ?utm_source=mhpboxenstopp&utm_medium=e-mail&utm_campaign=Unterlagen_Februar

http://www.mhp.com/de/events/detail/instandhaltung-mit-hana-14-07-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-024

http://www.mhp.com/de/events/detail/sap-cloud-for-planning-09-06-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-026

http://www.mhp.com/de/events/detail/globale-umsatzsteuer-im-sap-29-04-2014/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-114

http://www.mhp.com/de/events/detail/globale-umsatzsteuer-im-sap-29-04-2014/

http://www.mhp.com/de/events/detail/die-mhp-supercharge-edi-strategie-21-07-2015/?utm_source=mhpboxenstopp&utm_medium=Unterlagen&utm_campaign=14-025