Making cost engineering count


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Cost engineering isn’t just for car companies and chipmakers. Across sectors, complexity and cost pressures are giving companies good reason to follow a more disciplined approach to finding savings.


Cost engineering is a long-established practice in industries that deal with big, complex projects. In the automotive and advanced-industrial sectors, for example, companies have recognized for decades the need to take a whole-lifecycle perspective, balancing the costs of procurement, manufacturing and assembly, and in-service support.

Today, companies in many sectors are making the same calculations. Pressure to do so comes from a variety of sources: margins in many sectors are being squeezed by low-cost players, while new business models that include ongoing service and support create a strong incentive for companies to minimize their products’ through-life costs.

Our analysis suggests, however, that the maturity of cost-engineering capabilities still varies widely between sectors (see sidebar, “Cost-engineering maturity by sector”). And even industries that are applying the approach extensively often take a narrow approach to its use. They focus on a specific set of technical skills, such as estimation and modeling, while paying insufficient attention to cross-functional collaboration, idea generation, or the steps necessary to ensure cost-reduction opportunities are implemented and sustained. To capture the full value potential of cost engineering, a fundamental mindset shift is required.