What is the difference between target costing and value engineering?

What is the difference between target costing and value engineering?

Target costing focuses on determining the desired cost of a product based on market conditions, while value engineering aims to improve the value of a product by analyzing its functions and costs.

Can you give me an example of each?

Sure! For target costing, a company might set a price for a new smartphone and then work backward to ensure production costs meet that price. In value engineering, a team might analyze a car's design to find ways to reduce weight without sacrificing safety, thus lowering costs.

Which approach is more effective in product development?

It depends on the context. Target costing is effective for price-sensitive markets, while value engineering is great for enhancing product functionality and quality.

Are there any industries where one is preferred over the other?

Yes, target costing is often preferred in consumer electronics, while value engineering is commonly used in construction and manufacturing.