Building profitability from the design stage with SAP Product Lifecycle Costing
In an era defined by electrification, raw material volatility, and geopolitical uncertainty, cost planning has once again become a core management priority.
In this series, we explore how companies can elevate cost planning by leveraging SAP—aligned with the product lifecycle.
As the first installment, this article focuses on:
and explains how SAP enables advanced, data-driven cost management at each stage.
Cost planning is not merely about cost control.
Its true essence lies in:
Designing a profit-generating cost structure in the upstream phase,
analyzing actual performance after mass production,
and continuously feeding insights back into development.
This closed-loop cost management model is the foundation of modern cost planning.
However, in many organizations, information remains fragmented:
As a result, end-to-end visibility is limited.
SAP’s greatest strength is its ability to integrate these functions into a unified data model.
By connecting design, procurement, manufacturing, finance, and sales, SAP enables a seamless cycle:
Simulation → Agreement → Execution → Performance Analysis → Feedback
This transforms cost management from fragmented control into a strategic management discipline.
This series follows the product lifecycle of Tier-1 automotive suppliers:
This article covers Phases 1 and 2.
In this phase, companies develop new product concepts based on OEM requirements and market trends, and define:
At this stage, neither design nor BOM is finalized.
Therefore, cost estimation is based on:
With PLC, companies can build rough cost models at the concept level and conduct early-stage simulations, including:
These analyses can be performed quickly and systematically.
Using SAP Analytics Cloud and Margin Analysis, companies can visualize:
In this phase, RFQs, drawings, and specifications are finalized, and close collaboration begins among:
Most of the product’s cost structure is determined here.
Decisions made in this phase largely define long-term profitability.
SAP enables scenario comparisons by:
at the RFQ and program levels.
Through CAD/PLM integration, SAP tracks:
This ensures transparency and smooth cross-functional coordination.
Supplier quotations and contract prices are registered in PLC, enabling real-time analysis of cost drivers.
With integrated Engineering BOM and Manufacturing BOM, SAP supports:
SAP enables comprehensive analysis, including:
These insights directly support executive decision-making.
The greatest benefit is:
Preventing unprofitable projects at the design stage.
By visualizing material costs, processing costs, depreciation, outsourcing, and losses, suppliers can:
This enables a shift away from “loss after order” business models.
OEMs benefit from:
This article outlined the overall framework of SAP-based cost planning and its application in:
SAP’s greatest strength lies in enabling:
Closed-loop cost management
from concept through mass production and beyond.
As a result:
This leads to sustainable competitive advantage in the automotive industry.
In the next installment, we will explore:
SAP applications in the Industrialization and Pre-Production phases and beyond.
SAP Product Lifecycle Costing for Profit-Driven Manufacturing
We will continue to clarify the full picture of next-generation cost planning powered by SAP.
Parts of this article were developed with reference to generative AI suggestions and were reviewed, refined, and supplemented based on the author’s professional expertise and judgment.
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