In today’s marketplace original equipment manufacturers (OEMs) are being challenged to deliver innovative products (automobiles, machinery, etc.) to their customers at a reasonable price faster than ever all while trying protecting their margins.  The pressure to deliver the most cost optimal product puts pressure on the entire supply chain as each tier is also looking to optimize cost to protect their own profitability.  These pressures are amplified even further throughout the entire supply chain as there are still disruptions being felt from the recent pandemic.  Companies are seeking help in finding a solution that not only allows them to improve future product profitability but also gain efficiency in their design processes.

The need for accurate and timely target costing is paramount

The challenge is rooted in the manual processes and spreadsheets used in the process.  These methods no longer suffice because they impede rapid innovation and responsiveness to customer demand.  The data, particularly in the early stages of the cost calculation process, is often limited or scattered.  The details are either unknown or completely new as in the case of developing new products to meet new customer requirements – a common challenge in both New Product Introductions (NPI) or custom Engineering to Order (ETO) projects.

The solution is a standardized approach to product lifecycle costing – one that emphasizes transparency, access to trusted data, information sharing, and easy collaboration with supply chain partners. The goal is to secure future profitability as early as possible.  SAP Product Lifecyle Costing is poised to address these challenges and the specific needs of discrete manufacturers.

Flexibly calculating cost at all stages of development

A key capability of SAP Product Lifecycle Costing is the ability to access to current and historical cost information through integration with internal data from ERP and PLM systems.  The ability to bring data from these systems into early calculations, allows you to start your analysis from a solid foundation based on previous experience.  Using customizable templates to help kick-off the cost calculation process, quickly enables you to move away from spreadsheets with unreliable data.  Entire teams gain confidence from working from a shared source of truth that eliminates confusion and facilitates faster cost estimates.

Another key capability is the flexible, hierarchical costing structures helping to organize product cost information in a way that is readily understandable. SAP Product Lifecycle Costing’s ability to import data from existing systems – information such as bills of material and routing data as well as its comprehensive roll-up capabilities, calculation versioning, and the ability to distribute one-time investments across the planned life of a product – give you a true understanding of lifecycle cost.

Building upon a solid single costing platform  

SAP continues to introduce capabilities within SAP Product Lifecycle Costing which pertinent to needs of customers in the discrete manufacturing industries.  Let’s examine new developments and discuss their relevance.

  • New language support: Sales based costing scenarios require the ability to support end users desire to use their native language while using the application. With this need in mind, SAP Product Lifecycle Costing has added three new languages (Spanish, French and Italian)
  • Side-by-side Comparison of Calculation Versions: Customers require this capability in a costing tool when comparing different cost simulations to understand the deltas realized in trying to arrive at the most optimal product cost.
  • Flexible Item Categories: Enables calculation of new cost types which are especially essential with new business models (e.g., sustainability initiatives).  The increased flexibility delivered enhances the usability of the solution in modeling customer specific costing scenarios.  Customers can now achieve more granular detail in their costing structures and simulations.
  • Price Determination based on Vendors: A must-have feature for all automotive OEMs, suppliers and others who need the ability to simulate different scenarios (i.e., dual sourcing). You will be able easily simulate and visualize the impact of vendor changes and different vendor quotations and costs on the total product cost.
  • Scaled Prices: Another key capability required by the industry which is needed in order to manage purchasing complexities. SAP PLC will have the ability to manage price based upon a quantity ordered across the application or within a specific calculation version.
  • Integration to SAP Integrated Business Planning for sales and operations planning: Becoming more embedded with the supply chain processes in organizations, SAP Product Lifecycle Costing will be able to consider planned future sales volumes for lifecycle costing coming from sales and operations planning activities.  SAP Product Lifecycle Costing will then push product costs back to the planning teams to support business decisions relevant for overall supply chain.  The integration will drive tighter synergies within organizations and facilitate faster time to market with more accurate product costs based on projected sales volumes.

Accelerate your time to market (and profit)

By leveraging SAP Product Lifecycle Costing and the latest industry focused developments, discrete manufacturer’s can gain greater understanding of the cost dynamics during the product development and quotation support processes.  The greater cost confidence gained during the early product lifecycle and ability to simulate and compare alternative scenarios can dramatically improve margins and time to market with their products and services.

To learn more about how you can best leverage SAP Product Lifecycle Costing within your organization, please click here.


Special thanks also to contributors: Katarzyna Maciak and Uwe Skorzinski, SAP

Please Note:

All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions.

Randa Khaled

Randa Khaled

Author Since: November 19, 2020

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