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Integrated cost management throughout the product life cycle

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The assumed high level of designed-in costs is frequently used to suggest that the dominant focus of cost management should be in the design, not the manufacturing, phase of the product life cycle. Yet, many firms expend considerable energy on cost reduction during the manufacturing phase. This paper demonstrates that this paradox partly derives from an incorrect interpretation of the concept of designed-in costs and partly from erroneous assumptions about firms’ cost management practices. Based upon in-depth field research, the paper explores how a lean manufacturing enterprise distributes its cost management resources across the product life cycle. The research findings indicate that intensive and systematic cost management occurs in both phases of the product life cycle and that the majority of cost management in the manufacturing phase is not related to product redesign. Furthermore, the cost management practices in the two phases have been integrated to increase their overall effectiveness. These findings suggest that a significant portion of a product’s costs is not locked in by its design as commonly assumed.

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