Integration of Cost Simulation Tools in Product Development and Target Costing Processes : A Case Study at Scania

Abstract: With a more global market, manufacturing companies have to increase their focus on cost management to stay competitive. With new technologies available, new methods of evaluating concepts and ideas arise. Among these are simulation tools. Thus, the purpose of this study is to investigate how simulation tools can be integrated into the product development process to improve target costing. To achieve this purpose, a case study was conducted at a large manufacturing company, where a simulation tool was used. It was found that cost and manufacturing simulation tools can be used for target costing, negotiation with suppliers, as well as a helpful tool for design methods such as design for manufacturing and design to cost. Furthermore, cross-functional teams and good collaboration are a postulate for successful implementation and utilization of simulation tools in the product development process. The proposition is therefore that large manufacturing companies with advantage should implement cost and manufacturing simulation tools into their product development process to improve target costing.