Jonesing for Some Thought Leadership in Product Cost Management?

Spend Matters welcomes a guest post from Eric Arno Hiller, Managing Partner at Hiller Associates.

Hello again, SpendMatters followers. I've been off the air for several years, but my name is Eric Arno Hiller, and I am the "product cost management" guy. I started working on product cost management years ago while completing my masters thesis in mechanical engineering at University of Illinois. After years in product development the auto industry, and after business school, I founded a software company to solve the product cost management problem "once and for all." After six years as CEO and Chief Product Officer there, I realized that the problem was big enough that a tool alone would not solve the problem for companies. So, I founded Hiller Associates to help discrete manufacturing companies increase product profit, whether the product is before or after launch. We have helped many Fortune 1000 companies save tens of millions of dollars by first setting up the right cultural change, processes, and team roles to make any tool enablers successful.

Back in the day, when I was the author of the blog CostCents, Jason was kind enough to allow me to post a whole series on cost modeling techniques and some other aspects of cost management. Perhaps you remember such timeless classics as What's The Language of Your Business, The Fourth F, and The Fundamental Dimensions of a Cost Model. No? Well, they were good times, let me tell you!

But enough of the past. Product cost management (PCM) has a new home, which lives at my company's website. Here we talk about subjects that directly affect product cost/cost of goods sold (ergo product profit), such as:

And we have a special place in our heart for talking about American Manufacturing and its critical importance to the nation.

So what exactly is product cost management? That's an ongoing discussion with a lot of opinions on our site, but in this post we offer the following definition:

Product Cost Management -- An agreed, coherent, and publicized system of culture/goals, processes, people, and tools following the product lifecycle, that ensures the product meets its profit (or cost) target on the day that it launches to the customer."

However, if you're a graphical thinker like me, you may enjoy our World Map of Product Cost Management.

So, what will we be talking about with Jason, Sheena, Lisa, and the rest of the SpendMatters and MetalMiner folks? Here are some ideas:

  • What is the role of purchasing, engineering, and advanced manufacturing in controlling product cost?
  • How to make intelligent decisions on domestic sourcing vs. near-shoring or outsourcing to LCC countries.
  • Should cost in procurement
  • Indexing raw material costs in part prices to hedge the future

If you have questions or ideas for our discussion, we would love to hear your suggestions. Send them along to Sheena: smoore [at] spendmatters [dot] com.

There are obvious overlaps and adjacencies between commodities management, sourcing concerns, and product cost management as well, which we'll cover in detail. I look forward to the discussions and arguments; I hope you do, too.

- Eric Arno Hiller, Managing Partner, Hiller Associates

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