2.3 The difficulties of using target costing in service industries Target costing was introduced by major Japanese manufacturers for use in a manufacturing environment where:
§ a new product was to be designed to meet the target cost
§ a substantial part of the production cost consisted of bought-in materials.wｗw.ExamＷ.CoM
§ This environment facilitates use of a target cost approach since:
§ Professional design teams can alter the design specification of a new product until it matches their cost requirements.
§ Very large manufacturers such as Sony and Toyota are able to exert considerable pressure on (usually much smaller) suppliers to reduce their prices.
Service industries (e.g. banking, insurance, travel) provide a less favourable environment for the use of target costing:
§ It is much more difficult to make service comparisons than product comparisons, making it harder to determine a market driven price in the first place.
§ The introduction of new products and services in service industries usually occurs far less frequently than in manufacturing environment (e.g. Sony and Toyota introduce new models on a regular basis) and, in consequence, the equivalent of manufacturing design teams are rarely found in service industries.
§ Bought in materials are usually of modest significance so there is little scope for exerting pressure on external suppliers.
§ The major cost of any new product or service is salaries and unless lower cost delivery mechanisms (e.g. the internet) or radically different ways of working can be exploited there is limited scope for substantial cost reduction.
Illustration 6 – Targeting costs
A major bank and provider of credit cards wished to reduce the time taken to process credit card application forms and issue a credit card. The staff responsible for processing applications and issuing new cards were asked suggest how the period (of 14 days) could be reduced.
The staff were unable to identify any significant time savings. The senior executive responsible for the area decided to pursue a version of target costing and instructed his staff that new cards were to be issued within 24 hours of an application being received and it was their responsibility to identify how this could be achieved.
The imposition of this target forced a new approach to the problem and radical new ways of processing and approving applications were identified and implemented with the result that the 24-hour target was met. |
发表于 2012-2-23 17:09:42
