In the early stage of product development, the engineering department need a tool that enables an initial cost estimate of the expected product costs. At this point, there is no bill of material, no material, or other master data with which a reliable product cost estimate would be possible.
In SAP Product Lifecycle Costing, there are three main options to create a cost estimation depending on how far you are in the product development cycle:
- Preliminary cost estimate
This use case is relevant for all companies that require cost information within a project, for a product that is being newly designed, or a product that is planned as the successor of an existing product. Usually, the manufacturer wants to evaluate the potential cost elements, breakdown, and drivers before manufacturing the project. Typically, they will iterate towards target costs along different milestones in their development project.
- Quotation costing
The second use case centers around cost calculation related to an inquiry from a customer, where a quote needs to be generated. This could be an inquiry for a complex, customer-specific machine, for a set of products, or even a solution consisting of multiple products, with varying quantities.
- Lifecycle costing
The third use case typically relates to an inquiry from a customer as well. However, in this case the cost of the product or solution needs to be calculated over a period of time in the future, taking into account varying volumes, component and raw material prices, and labor rates or currency fluctuations.