Cost engineering, a critical aspect of organizational efficiency, manifests itself differently across companies and industries. To delve deeper into this dynamic, SPCEA recently conducted a survey on LinkedIn, aiming to understand where exactly the cost engineering function resides within different organizational structures. The results and associated feedback shed light on some intriguing rationales:
Becoming a cost engineer typically requires a combination of education, skills development, and practical experience. There are multiple ways to become a cost engineer but here is one step-by-step guide on how you could do it:
In the realm of Cost and Value Stream Engineering (CVSE), collaboration with suppliers is pivotal to achieving cost efficiencies and operational excellence. However, ensuring alignment and mutual commitment is often a challenge. Enter the Upfront Agreement, a strategic tool that fosters transparency, sets expectations, and creates a win-win foundation for supplier workshops and collaborations.
There is a certain innocence in numbers. Just like music, they can create a harmony that soothes the soul. Maybe that’s why some costing professionals don’t stress when performing their calculations. They put their numbers on the page, and they walk away. No harm, no foul. Their conscience is clear. Yet, numbers can cause great harm that can result in the pain and suffering of many people. How is this possible?
In earlier blogs, I explained my views about depreciation; both its irrelevance in business decision-making and the way it is treated as a fixed annual cost. An organization does, however, need to provide for the preservation of its existing capital based as it sells products and services to customers. One way to accomplish that is to develop a Capital Preservation Allowance. I first proposed this solution in an article titled “A Modest Proposal for Pricing Decisions” that appeared in the March 1993 issue of Management Accounting. This allowance is a long-term, forward-looking view of capital requirements that replaces depreciation in the calculation of product and process cost and enables a company to effectively accumulate the funding required from current products and services to preserve existing productive capabilities.
Over the last few weeks, I’ve had some truly powerful coaching sessions, received amazing questions from many of you, and reflected deeply on a core theme that keeps surfacing—intention.
I had some time to reflect and do a bit of research on key trends over the holiday.
An accountant, a financial analyst, and a cost estimator walk into a bar. They sit down on the stools at the counter.
Hey everyone! It’s Halloween week and I believe it is the perfect opportunity to talk about Leadership.
As the demand for cost engineers continues to grow, understanding the academic backgrounds that hiring managers seek has become increasingly important. In a recent survey conducted by SPCEA, we explored the educational qualifications preferred by employers when hiring cost engineers. The results offer valuable insights into the qualifications that are most valued in this profession.
Knowledge is power, but how would you know whether more or new knowledge is needed? What if you were convinced that the knowledge you had was, in fact, the best and only knowledge you needed? Would you refuse to seek new knowledge and resist its merits? Based on human history, the answer is probably yes. As much as human civilization has advanced in the last several thousand years, change has always been resisted with fervor. From the advent of cars over horse buggies to the recent advent of AI, most people have always preferred to stay within their comfort zone of well-established social and technological structure. Costing has not been any different.
For those lucky enough to have had careers in the automotive industry, Long-Term Agreements (LTAs) are as common as cars themselves. Most consider them a normal part of doing business. They are meant to provide suppliers with assurances of volumes over the full life of the program in exchange for steady supply and cost reductions for the customers. It’s standard practice for the suppliers to offer customers LTAs in the form of annual price reductions (or rebates) over program life and/or an upfront lump sum payment before the start of production (SOP). The larger the price decreases or lump sum payments, the better for the customers. The supplier sales team is happy to win the business, and the customer purchasing team is happy to bring savings to their company every year. Except that none of it is real.
The product cost engineer plays a crucial role in ensuring efficient product design, production processes and cost-effective operations within manufacturing settings. Here are ten important skills that I think every product cost engineer should possess:
