Research On Target Cost Control Method For New Product Design Of Chinese Domestic Car Producer

The automotive industry is a strategic industry in the national economy, which has large relational degrees and obvious driving effects on the upstream and downstream industries, reflecting the level of industrialization of one country, known as the " industry of industry." After nearly 60 years of development, China’s automotive industry has made considerable progress. From 2009, China has become the world’s largest automobile producer and selling market.However, we must clearly realize that the China’s automobile industry, especially the car industry, is largely dominated by the joint ventures. The domestic car companies are at a disadvantage in size, market share, profitability and other aspects. Besides, the domestic car makers has weak development foundation and insufficient R&D funds, which prevent them from getting core technology and R&D capabilities.Although the domestic car companies still have many deficiencies, their important roles can not be denied. Cultivating the domestic car companies is of great significance to ensuring China’s economic security, to enhancing national industry strength and to protecting the Chinese consumers’rights and interests. To solve the problems encountered during development process, the domestic car companies must strengthen independent R&D capability, acquire the core technology and improve quality control. What is more, they must control the cost of new product better, so that they can provide the consumers with low-price but high-quality products while ensuring corporate profitability. Therefore, to better develop the domestic car companies, the new product development must be combined with cost control.However, the domestic car companies have many difficulties in the cost control for new product development. First, affected by the traditional cost control concept, a lot of domestic car companies will focus on cost management in manufacturing stage and ignore the cost management at design phase; Second, the independent developing time of domestic car companies is short, and therefore the historical R&D data and cost data are lack for the new product development; Third, the business management of the domestic car companies is not so satisfactory, and the method which can effectively control the product costs for new product design is missing.In order to solve these problems, this paper studies the cost management for new product development in the world’s famous car companies and proposes using target cost management to control new product cost. According to actual needs, this paper designs a target cost control process, selects the target cost estimation, the target cost decomposition, and the target cost realization as the main subject of this study.In the early stages of new product development, this paper proposes a target cost estimation method based on neural network, which can help determine the target cost. This method composes the process of information collection, data processing, design attributes selection, product cost ratio estimation, backward calculation of production cost, BP neural network modeling and cost estimation of new product. As the cost data are confidential, many cost estimation studies are lack of data. This study presents an indirect method to solve this problem. The neural network based method can estimate the new products target cost at the early design stage, simulate the target cost of competitors, and aid the definition of the target cost. It can also help designers improve designs to reduce product cost at the early design stage.At the detailed design stage of new product, this paper introduces Tear Down method to decompose the target cost. This paper also innovates the traditional Tear Down method by combining it with statistical method. In this way, the desingers can learn from the competitors through analyzing their products’statistics, and can determine the benchmark competitive products. It can also help designer find the design attributes which have significant impact on the product cost, decompose the target cost, and control the new product cost while maintaining or improving product quality at the design stage.At the target cost realization stage, the target cost is first analyzed by the Pareto method to identify the procurement cost is the key to achieving goals. By researching the characteristics of the procurement and supply chain management for demestic car companies, this paper comes to the conclusion that supplier satisfaction should be valued to ensure the security of supply chain. In the paper, a function is designed to quantify the supplier satisfaction. The supplier selection index system is then extended with the quantified supplier satisfaction. This paper studies how to use the quantified supplier satisfaction in management. It also studies the optimal target cost control model with the supplier satisfaction, which can reduce the risk of supply chain while achieving the target cost at the design stage.The target cost control method in this study, with universal adaptability, can be used either as a whole in car companies, or can also be extracted in some way to be used alone. It can also be integrated with the existing cost and business management system in companies. This target cost control method helped H company, which is one Chinese domestic car maker, realize the "MB" new model’s target cost at the design stage. At present, "MB" model has been successfully introduced into the market and becomes the one with the highest profit margins in H’s existing product models.