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The Future of Cost Engineering: 6 Trends You Should Know About

Products in the manufacturing industry are faced with expectations and requirements that do not all seem accomplishable. Find out about the biggest challenges and how to tackle them.

Both political and societal expectations and mega-trends challenge the industry considerably. To meet these challenges and remain competitive, professional cost management is essential. What exactly is cost engineering anyway? What benefits does it bring? And what methods can companies use to make their cost engineering fit for the future?

Cost Engineering - What Does That Mean?

Cost engineering refers to agile and intelligent cost management, which has become indispensable in the manufacturing industry. Professional cost engineering combines engineering knowledge with systematic analyses of cost factors in order to design production processes as economically and efficiently as possible using several methods.It involves the entire supply chain and is primarily aimed at decision-makers and experts in the functions of product development, purchasing, cost management and controlling in the manufacturing industry, from original equipment manufacturers (OEMs) to indirect suppliers. It should be noted that about 80 to 90 percent of future product characteristics are determined in the early product development phase. The course for effective cost and CO₂ management should be set in the early product development phase, because all important parameters can be influenced as early as possible.

Professional Cost Engineering Offers the Following Advantages

Calculation and control of costs
Competitiveness
Rapid decision-making
Risk management
Sustainability
Resource optimisation
Project management
Objectification of negotiations
Maximising customer value

How to Overcome Future Challenges

In addition to the general goal of avoiding or containing costs in the value chain, factors such as environmental friendliness and sustainability are becoming increasingly important. First and foremost: CO₂ emissions in manufacturing, including raw materials... The EU's Carbon Border Adjustment Mechanism (CBAM), which has been in force since October 2023, is particularly relevant for manufacturing companies.

No less challenging is the increasing lack of human resources. There is already a noticeable lack of qualified specialists with the necessary know-how.

What Trends Await the World of Cost Engineering?

These challenges require rethinking and action in many areas of cost engineering. We have identified six major trends that will shape the industry in the future:

Transparency of costs in supply chains: Due to increasing regulations, companies are paying more attention to analysing production costs and risks in their supply chains. This helps to identify inefficient processes.
Digitalisation and automation: the integration of digital technologies enables more precise calculations, cost analyses and forecasts. Processes are accelerated through automation of data collection and processing, and efficiency is increased through low error rates.
Integrated software solutions: integrated platforms cover different aspects of cost management by accessing the databases of different software and tools. This facilitates collaboration between teams and departments.
Cloud-based solutions and collaboration: thanks to cloud technologies, access to cost engineering tools is simplified and collaboration both within a company and across companies is significantly promoted.
Sustainability: cost analyses must increasingly take environmental impacts and sustainability aspects into account. Environmentally friendly production processes can reduce impacts on resources and CO₂ emissions, but must be evaluated in terms of possible additional costs.
Rising energy prices and inflation: different scenarios can be run through simulations to understand the impact of changes on the cost structure.

Conclusion

Cost engineering is and remains indispensable in order to exploit all potentials as a manufacturing company and to remain competitive. The motto: faster, cheaper, more sustainable. Increasing standardisation, automation and digitalisation are elementary to accomplish these goals. The next few years will bring great challenges, but they can be mastered through intelligent solutions in cost and CO₂ management.

More information on the challenges and trends around future-oriented cost engineering can be found in this whitepaper "The future of cost engineering". Read now.

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Author

Andreas Tsetinis

Chairman & Founder

10.10.2023

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