The most effective way to control costs is to design them out of the products. However,
cost data is rarely available for product designers in a usable form. The aim of
this study was to investigate the possibilities of activity-based costing and the
modeling of design, purchasing and manufacturing processes in providing useful cost
information for product designers. The hypothesis was that activity-based costing
and process modeling might provide an effective tool for the evaluation of different
design options. The study was conducted in a large Finnish manufacturing company.
First, the most costly items of one product's sub-assembly were studied in order
to identify the activities needed to produce the items and to calculate their activity-based
costs. Second, the processes, in other words the activity chains, were modeled with
graphic flowcharts from product design, purchasing, and manufacturing departments.
Finally, the applicability of activity-based cost information and process models
to product designing practices was tested. The results of the study suggested that
activity-based costing and process modeling provide a good starting point in heading
toward more cost-conscious design. This way the designers learn the relationships
between the activities performed in the organization and their associated costs.
The development of a parametric cost estimation model based on activity-based costing
and process modeling provides a challenge for future research.