Innovation Activity of TCMS

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Innovation Activity of TCMS
( Total Cost Management System )
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Contents
1. The necessity of TCMS 2. Introduction of
TCMS 3. The outline of TCMS 4. Cost planning
process and TCMS system in each phase 5.
Implementation contents of TCMS 6. Implementation
procedure of TCMS 7. Introduction effects of
TCMS 8. Implementation Theme and Period (Standard
alone / Client server) 9. Actual result of TCMS
consulting
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1. The necessity of TCMS
Tools for cost management are recommended.
1. It is impossible to calculate the clear
manufacturing cost because a company does
not have detail cost tables. 2. Quick decision
makings for the selling price and the suitable
profit fixing , etc are not possible
because a company does not know the manufacturing
cost in advance when it develop a new
products. 3. A company had many experiences that
new products turned out to be not profitable but
loss making ones after production start
because of no knowledge about drawing whether
these will satisfy the target cost or not at the
design phase. 4. There is no standard to measure
the productivity because the standard time for
each production process (Net time) is not
set. And also due to this reason, it is difficult
to expect the enhancement of productivity
. 5. The profit-rate increment is not possible
because the surplus rate of material processing
time, preparation time for change, etc are
fixed excessively. 6. Cost down for already
ordered parts or newly outsourced parts is
impossible because there is no way to find
out how much cost occur in each process. 7. Many
people in the cost relating department waste
their most time to calculate cost, and
purchasing department depend on the approximate
negotiations without clear cost standard when
they decide the price and also the planning for
purchasing policy, supplier guidance, etc are
not performed well.
Ideal cost
Cost that occurred already

• Quantified cost that is
• defined before
• products made
• Managerial
• accounting cost

• Cost that occurred
• from the result of
• production activity.
• Financial accounting
• cost

Financial accounting system
Total cost management system ( TCMS )
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2. Introduction of TCMS
This is a developed program to set the total cost
standards of company systematically and precisely
and also to construct the target cost system in
order to utilize the Total cost standard
efficiently. ( TCMS Total Cost Management
System )
What is The TCMS ?
Traditional developing environment
Profit securing-oriented development through
tight target cost management
1. Development for pre- occupation of market
based on the exclusive technology
lt Change of business operation environment gt

• Globalization and Unification
• of market
• Advent of enterprise that has
• competitiveness
• Necessity that to secure cost
• competitiveness
• Shortening of products life cycle
• Diversification of customers' need

2. Cost decision by cost addition method
Manufacturing cost Profit Selling price
1. Profit securing-oriented Cost decision
Selling price - profit Target cost 2. Cost
planning activity in the phase of
development and design 3. Arrangement of Cost
standard and Cost system for the
calculation of target cost and its
management
3. Design cost of products gt Target cost
4. Cost reduction activity in the MP phase
and Enforcement of cost management
5. Mass Production , Manufacturer-oriented
development
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3. The Outline of TCMS
Securing total competitiveness of new products
Development of New products that has the Optimum
function and the Minimum cost through the
construction of TCMS
Cost planning
Optimum products planning
CONCURRENT ENGINEERING
1. Set of reasonable target cost and its
distribution / Target cost management 2.
Pursuing the Minimum Cost focused on the
Design, Manufacturing and Purchasing - the
Opportunity Loss Index - VE, VRP, DFMA -
Setting the optimum specifications for the
products function - Deployment of New method,
Reverse engineering - Purchasing planning
with the minimum cost - Manufacturing planning
with the minimum cost
1. Establishing the new products planning
process with customer - oriented mind 2.
Innovation of technology in the phase of
Development and Design 3. Construction of
Engineering information system
FRONT LOADING
GUEST ENGINEERING
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4. Cost planning process and TCMS system in each
phase
Total development plan for new products
Conception of each functional area
Conception design ( Conception drawing )
Basic design
Detail design
Trial manufacturing - Mass Production
Products Planning Process
Products planning
Profit plan
Set of Selling price, Target profit and Target
cost
Arrangement of accomplishment and Drafting of
cost improvement plan
Distribution of Target cost according to the
Items of Expenditure, and Function
Set of Target cost for each part
Activity to achieve target cost
Cost Planning Process
Analysis of current products
Analysis of competitors' products
Management of target cost achievement at each
phase
Set of target profit rate
Basic estimation (Temporary estimation)
Cost down by the analysis of difference between
cost
Distribution of target cost
Calculation of standard cost
Methodology for the Planning of optimum cost
TCMS (Total Cost Management System)
Establishment of standard cost system of
enterprise
COST BENCHMARKING
DFX (Design For X)
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5. Implementation contents of TCMS
1) Embodiment of Optimum Design using TCMS

P R O D U C T S P L A N N I N G
Selling price
Achievement of optimum design that will
satisfy the target cost
Drawing Revision within the Target cost
Target Cost
Set of the Necessary characteristics
, Performance, Condition of each function
Function design that will satisfy the
customer
Partition of target cost according
to Function and Area
_
Detail Design (Reflection to drawing)
Profit
Standard Cost

Target Cost
Cost Estimation
Unification of cost estimation system by TCMS
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2) Cost down for already ordered parts using TCMS
Policy for the use of purchasing-line
Cost standard Of TCMS
Policy according to each rank
Difference analysis of Cost
Implemen -tation STD
Operation STD
Systemization of Cost estimation
Policy Items
Policy contents
A B C D
Request of pre-investigation
What is the difference on the TCS?
Requested Q . C . D To The Purchasing Line
From The Ordering Party
Change of use according to the score
Compe - tition principle
State of ordering party
Co- existence / Co- prosperity
Cost estimation standard
Purchasing Policy For The Improvement Of
Q . C . D
Where the difference come from ? Extraction of
cost element
Policy for Use
Request of estimation sheet
Sum of purchasing cost Sum of purchasing cost by
TCS

Q . C . D Result Evaluation Of The Purchasing
line
Difference analysis of books
Investigation of cause
Implementation Of Utilization Policy According
To The Managerial Classification Of The
Purchasing line
Tendering authority for submission of estimation
Policy for Order
Guarantee of ordering price
Difference analysis with the investigation on
the-spot
How can approach to the TCS COST?
Final decision of rank based on the expected
evaluation and result of consultation
Degree of change
Instruction for management
Analysis Of difference
Overall evaluation
Policy for Fostering
Cost evaluation side
Cost decision For the purchasing line According
to the policy consultation phase
Fostering of talented person
Expected direction of short,mid, long-term
Policy consultation according to the
TOP management
Instruction for implementation
Achieved point Cost point 2
Achievement evaluation side

Payment rate
Policy for Payment
Individual consultation
Cash rate
(Cost decision according to the part no.)
Visualization of problems and Concretization of
expected direction about the Q,C,D,S
Bill
Evaluation Std for achievement
Production information
Policy for Information offering

Information of production engineering
Evaluation of business operation attitude
Contents of attractive given policy according to
the used rank
Movement of automobile industry
Evaluation of quality assurance capability
Use of welfare facilities
Policy for Service offering
Evaluation of delivery assurance capability
Use of supplier STD for policy operation Policy
for order Policy for foster Policy for
support Policy for information offering Policy
for guarantee
PR for purchasing-line
Evaluation of financing capability
TOP? ??
Visiting
Policy for Guarantee
Evaluation of production capability
???????
Evaluation of company environment
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3) Cost decision of for newly ordered parts
Reflection to the policy for utilization
according to the each supplier rank
Evaluation standard of supplier
Evaluation of supplier
1. General information 2. Competitors
information 3. Cost information 4.
Supplier information
Rule of TCMS operation
C O S T T A B L E
D. S P E C
Cost registration
C O S T D A T A
Standard Cost
C O S T C O N T R O L C E N T E R
Cost decision step by step
Monthly report of purchasing div.
C O S T
D E C I S I O N O F S U P P L I E R
P U R C H A S I N G P R I C E E S T I M A T I O
N
130
Out- Sourcing part
Eval. of each types
120
Diff.
110
105
P. C O N D I T I O N
Eval. Of industrial classification Press,
Forming, Machine, etc.
TCS
3??
6??
9??
???
Estimation, Occurred cost
Eval. of each supplier
Submission of detail estimation
Eval. of each buyer
Eval. of each division
Eval. of each factory
C O S T T A B L E A R R A N G M E N T
5. Cost standard 6. Cost table
D. S P E C
Request of estimation from more than 2 suppliers
Standard price
C O S T S T A N D A R D
Reflection to the drawing spec.
P R I C E
Raw material / Maker made
Reflection to the supplier, improvement
Diff.
Reflection to the suppliers reforming
P. C O N D I T I O N
Reflection to the arrangement of products
Submission of estimation specification
Formation of suppliers consociation
Estimated price
Rule of Price operation
Evaluation standard of supplier
Evaluation of supplier
Reflection to the principle of competition for
utilization
7. TCS operation manual
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4) Application of the work control system to
improve productivity
Estimation of time value according to the
systematization of TCMS
Development and improvement of work managerial
system that is oriented to the Opportunity Loss
Zero
Purpose In order to challenge to the zero
managerial loss and to improve the productivity
through the finding of the Opportunity Loss,
Efficiency Loss in advance and prevention of
their re-occurrence.
Managerial loss factors 1. Waiting work
2. Indirect work 3. Abnormal work 4.
Additional work 5. Defects repair work 6. Loss
of efficiency
Production
Manufacturing order
Understanding of result
c.measure
Understanding
Managerial loss time
Plan
Loss time Daily working time - Occurring
time according to standard time
Finding abnormal condition and countermeasure set
Condition
Visual management
Load adjustment
Simple management
Progress management
Characteristics
Visible managerial system
1. It is possible to construct the economical
managerial system 2. It is possible to prevent
the managerial loss in advance. 3. In case of
potential problems, it is possible to quantify
the managerial loss factor. 4. It is possible to
realize the visible management. 5. It is
possible to adjust load Optimum condition. 6.
It is possible to calculate the cost
estimation. 7. It is possible to realize the
visual management. 8. It is possible to reduce
the stocks. 9. It is possible to minimize the
managerial loss.
Countermeasure For prevention
Each session
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5) Standard cost achievement of industrial
classification
C O S T D E G R E E
C O S T L E V E L
S T A N D A R D P R I C E
S E L L I N G P R I C E
What is the difference ?
Comparison
D . F A C T O R
D . F A C T O R
Analysis of different cost
- Comparison of process - Comparison of time
value - Comparison of processing rate -
Comparison of management/selling profit
P . C O N D I T I O N
P . C O N D I T I O N
Improvement direction and countermeasure
Implementation of cost improvement method in
order to survive from the severe competition era
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6. Implementation procedure of TCMS
1) Set of new cost standard and Construction of
TCMS
PHASE 1
PHASE 2
Set of cost standard
Systemization
1) Selection of target object, Analysis of its
composition and specification 2) Selection of
target object and Policy decision to make
table 3) Extraction of variable cost factors and
collection of necessary data 4) Making out of
cost table 5) Completion of Simulation and Table
1) Confirm of system requirements - Screen of
In-put and Out-put - Number of users - Using
environment 2) Comparison and analysis with
the standard system 3) System Customizing 4)
System test and completion
T C M S Preservation
PHASE 3
Utilization of TCMS by each division
Design division
COST CONTROL CENTER
Suppliers
Design Cost
Outsourcing standard cost
Standard cost of company
Target Cost Management
Cost down for already ordered parts
Cost decision of New products
Enhancement of productivity / Work Management
Standard cost management of industrial
classification
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2) Set of cost standard
1st Block
2nd Block
3rd Block
4th Block
Selection of objective div. and analysis
Policy to make table and data collection
Preparation of cost table
Cost calculation and Table completion
Policy to make table
Analysis of products composition
Policy to make table
Preparation of time value table
Calculation Of Processing cost
Time table value of 00 factory
Process analysis and extraction of time variation
factor
Range and Unit of table making
Price of each products
P R O J E C T T E A M
Processing rate table
Preparation of parameter
Range of direct material cost
Table of OO material
Composition of products
Time check (WF method, SW method)
Calculation range of processing cost
Set of time value coefficient
Unit of facility and each processing
Completion of time value table
Analysis of processing route
Unit of subsidiary material and part
Cost calculation
Processing route of products
Set of processing rate of each process each
facility
Form of table making
Cost calculation of each products and each part
Understand of process, facility
Graph
Set of condition for model factory
Part Phenomenon Cost STD
Matrix
Extraction of all necessary percentage with the
set of model factory
Calculation formula, etc
Extraction of processing rate of each process and
each facility
Data collection
Set of material standard
Calculation of Material cost
Cost calculation according to each supplier
Relation of necessary time
Set of cost for each material specification
Supplier Phenomenon Standard cost
Relation of processing rate
Set of material cavity
Relation of material cost
Set of recovery rate of disused material
Calculation of necessary material cost
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3) Systemization
SYSTEM COMPLETION
S Y S T E M C U S T O M I Z I N G
Pre-preparation

• - Confirm of system requirements
• - Form confirm of In-put/Out-put
• - Confirm of the number of users
• - Confirm of using environment
• Confirm of conformity with
• the current system

Model Plant Data Base
Completion of target cost system with the
application of companys cost standard
Securing of optimum cost standard for company
Material Cost Data Base
All necessary coefficient D/Base
- Transformation of In-put/Out-put screen -
Training for users - Training for maintenance -
Preparation of operation manual
Each Process Data Base of Time value
Processing rate D / B of each process

• S/W modification in order to reflect the system
  requirements
• Reconstruction of In-put/Out-put screen and
  Coding

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7. Introduction effects of TCMS
Utilization in the phase of development /
design
Design to achieve the target cost
1. The optimum design which will enable to
achieve the target cost is possible through
cost simulation in the phase of development /
design 2. Swift decision-making can be made
because precise cost calculation in advance is
possible in the phase of development /
design
Improvement of Productivity for company- making
goods and cost down
Improvement of 2030 Productivity and Cost
down
1. Great improvement of productivity is possible
because the Loss in the production process
is calculated automatically. 2. Great cost down
is possible because the every Loss that occur
from material margin, processing process
etc. can be eliminated.
Utilization by the purchasing div.
2030 Cost Down
1. Great cost down is possible through the
securing of clear cost standard of already
ordered parts ( Elimination of Black Box ) 2.
Ordering with the minimum cost is possible when
decide the cost of newly out-sourced parts
1. Reconstruction of cost relating work is
possible due to the drastic reduction of
cost calculation time ( will be reduced to about
1/5 1/10 level) 2. Accurate manufacturing cost
calculation is possible through the arrangement
of objective and exact cost table in a short
time with the comparison and analysis
between the standard cost table of own-company
and other companies. 3. Loss elimination and
speed up of business operation are possible with
the unification of cost information due to
the unification of purchasing cost and design cost
Utilization by the cost div.
50 personnel reduction of cost relating Div.
and Business level up
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8. Implementation Theme and Period
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9. Actual results of TCMS Consulting
Major consulting contents
Major companies

• Composition of products and Analysis of
• processing route
• Arrangement of cost management system
• Standardization of net working time
• Set of all necessary percentages
• Design and utilization of standard cost
• ( Construction of TCMS System and Utilization)

• DAELIM MOTROS
• DAEDONG INDUSTRY
• DAEWOO PEOPLES CAR
• DONGNAM PRECISION
• FRONTIER ELEC.
• etc.