Put simply, target costing is a simple equation that identifies the sales price and deducts the profit margin (say, 10%) to establish the target cost price.
Value engineering then looks at ways to optimise those products or services to deliver greater value to the customer and still meet that target cost price.
Companies that leverage target costing and value engineering together are more robust to handle downturns, while maintaining a competitive advantage.
The Construction Project Manager and Value Engineering
Led by the Construction Project Manager, value engineering is initiated during the planning phase of a project and managed throughout its development.
Construction Project Managers pay particular attention to ‘results accelerators’ to generate the best possible value. For example, the Construction Project Manager will review how to be creative, address roadblocks and gather all available quotes to make informed and intelligent decisions.
Value Engineering is more than just cost-cutting
Although Value Engineering involves investigating alternative construction methods and materials to reduce costs, it’s not just about cost-cutting.
SOFC carry out a systematic review of all the essential project functions, including capital and recurrent costs. We focus on achieving best value for money. Our team carefully considers cost reduction measures, higher quality products, lifecycle analysis and maintainability through value engineering workshops. We go to great lengths to understand each client’s project objectives and how they can be achieved.
SOFC prioritise making the design more efficient without reducing essential performance, reliability or maintainability. And we do this so well, clients return again and again.
Now that’s true value engineering.