Hello! My name is Shun Hatta. Please listen to me. Nowadays, the technology is progressing, so, the running cost, including personnel cost, maintenance cost, and disposal cost, is relatively increasing when compared to the initial cost. So, users tend to have more and more interests in “user cost”, and so demand more on products involving less user cost. As a result, producers have to manage the cost including user cost to satisfy the users. So, there should be a way for producers to manage such cost. Maybe some of you are not very clear about what “user cost” is. Let me explain to you. It is the cost burden on USER after purchasing the product, for example, running cost, including maintenance cost.
To find out the way how producers manage the cost including user cost, we put our focus on the concept of “Strategic Cost Management”. Here is its definition. “Among all cost management methods which aim at both increasing customer values and decreasing cost, Strategic Cost Management is one that especially focuses on strategic issues.” For example, Cost planning, VE, ABC and LCC are techniques applying “Strategic Cost Management”. In this study, we will emphasize LCC, Life Cycle Costing, which is most related to user cost.
LCC is “A system tracing and adding up the costs covering from R&D to service and support to customers, as well as the value chain accompanying each product”. However, a clear definition has not been established by scholars yet. Perhaps, in only sentences, it is not easy to understand LCC. So, on the next slide, we will show a figure of LCC to help you understand more.
This figure is adapted from the previous study of Horngren and Harrison.
If we regard the cost of R&D, Product design, Marketing, Distribution and Customer service as LCC, this LCC is only the Product Life Cycle Cost in a narrow sense. By adding the cost of usage and disposal to Product Life Cycle Cost in a narrow sense, in this case, it is Total Life Cycle Product Cost. Moreover, when adding the cost of Environmental conservation, it becomes the Environmental Product cost. In our research, LCC is defined as the Total Life Cycle Cost focusing from user’s viewpoint.
As a producer, if you make “total life cycle product cost” visible, you can implement cost management activities focusing on the “total life cycle product cost”. So, you can then decrease the LCC, grasp the value chain more easily, and also make use of life cycle data to carry out product and marketing strategies.
Now, do you have a clearer image of what LCC is? This slide shows how many companies have introduced LCC in Japan, according to some surveys investigating Japanese companies’ actual practice. Below shows the percentages of companies implementing life cycle costing. From this data, we think that in Japan, life cycle costing is not introduced very much.
So, our Research Motivation is “Why don’t companies introduce LCC, which focuses on user’s viewpoint?”
In this chapter, we will tell you how to progress our research. Let’s review Chapter 2 once. In chapter 2, based on the discussion of the importance of customer orientation, our focus is put on “Life-Cycle Costing”, a way to incorporate user’s viewpoint into cost management. However, even though LCC is considered to be an effective way to reflect the user’s viewpoint, LCC is seldom introduced into companies. Then, what cost management do companies implement to reflect user’s viewpoint on cost? This is our Research Question.
We designed this model diagram to see how the ‘LC’ concept can help reflect user’s viewpoint in a company. Then, we start to explain this diagram. By the way, there are definitions of the keywords in the next slide. Please refer to them. At first, a company gets information of users to estimate user cost. Based on the user information and product cost, LCC can be calculated and reduced at the stages of R&D and Product Design. When stages progress from R&D to Customer Service, the total product cost should be kept within the desired range of LCC. Information of both LCC and user is used at each stage. Then, corresponding to users’ needs, the company decides the product price by market-pricing. By doing so, it makes users’ satisfaction up. Finally, it can acquire competitive advantages in the market. This is our model diagram for the process of reflecting user’s viewpoint.
From the model explained before, 5 focus points of creating an effective management system are landed. They are, first, the cost targeted for cost reduction; second, relationship with users; third, internal information sharing and product value chain forth, price-decision making; and fifth, product development process. We will use this model and these 5 main focuses as a framework for studying the practice in companies.
Now, we will talk about our on-site interview research. To select the companies to be interviewed, we made use of the “NIKKEI.goo Perfect Guide of Companies”. In the database, among the companies classified as ‘industrial machinery companies’, 27 are non-listed companies headquartered in Kyoto. We approached them for assistance in our research and got permission from 5 companies for firm visits. By so doing, we expect to investigate into their actual conditions of how user’s viewpoint on costs is reflected.
This slide shows the companies permitting us to interview. Among the five companies, since Nabel is the company which we have completed the most detailed analysis, we will talk about “Nabel” only in this presentation.