What is Product Costing Software?

Manufacturers today face growing pressure to optimize costs, manage supply chain risks, and ensure profitability in a competitive market. Traditional cost estimation methods, such as spreadsheets, are prone to errors and inefficiencies. This is where product costing software comes in - a powerful tool that automates cost calculations, enhances transparency, and improves decision-making.

In this guide, we explore what product costing software is, how it works, its key benefits, and why it’s essential for manufacturers looking to stay ahead.

What is Product Costing Software?

Product costing software is a digital solution designed to estimate, analyze, and optimize the costs associated with product development and manufacturing. It enables manufacturers to calculate total production costs, track supplier pricing, and optimize cost efficiency through real-time data analysis.

Key Features of Product Costing Software

• Granular Cost Breakdown: Beyond basic estimation, the software enables detailed analysis of direct and indirect costs, helping manufacturers pinpoint cost drivers at every stage.
• Integration with Engineering & Business Systems: Seamless connectivity with CAD, PLM, and ERP systems ensures that design changes are immediately reflected in cost assessments, keeping calculations accurate and up to date.
• Advanced Simulation Capabilities: The ability to model various production scenarios allows cost engineers to assess the financial impact of design modifications, material substitutions, and process optimizations.
• Automated Cost Benchmarking: Compares supplier pricing with industry standards, providing procurement teams with data-backed leverage in negotiations.
• Sustainability & CO₂ Impact Analysis: Tracks carbon footprint alongside costs, aligning financial objectives with environmental responsibility.

Who Uses Product Costing Software?

Product costing software is essential for cost engineers, who rely on it for precise calculations; procurement teams, who use it to negotiate better supplier pricing; finance departments, who need accurate cost data for budgeting and profitability analysis; and R&D teams, who leverage cost insights to optimize product design.

How Product Costing Software Works

Step 1: Understand

Early-stage evaluation of entire systems within minutes, immediately improving design-to-cost and target setting.

Step 2: Analyze

Data-driven calculations within seconds, increasing the efficiency of your cost engineering and sustainability activities.

Step 3: Optimize

Powerful analytics toolkit for developing cost-saving measures helps you focus on the most effective measures and prioritize accordingly.

Key Applications of Product Costing Software

1. New Product Development

Before launching a product, manufacturers use cost software to forecast production costs, ensuring that design and material choices align with budget constraints while maintaining product quality.

2. Supplier Negotiation & Procurement

With should-cost analysis, procurement teams can engage in data-driven negotiations, preventing overpricing from suppliers and ensuring more profitable contracts.

3. Make-or-Buy Decisions

The software evaluates whether a component should be produced in-house or sourced externally, providing a comprehensive cost comparison for strategic decision-making.

4. Variant Cost Management

For manufacturers producing multiple product configurations, the software simplifies cost tracking across different versions, ensuring maximum profitability across the portfolio.

5. Sustainability & CO₂ Compliance

With rising global regulations on sustainability, product costing software allows manufacturers to track Scope 3 emissions, assess CO₂ impact, and integrate sustainability into cost-based decisions.

Benefits of Using Product Costing Software

1. Eliminates Errors

Unlike spreadsheets, automated costing tools reduce human errors and inconsistencies.

2. Speeds Up Decision-Making

Automated calculations save time, allowing manufacturers to respond faster to cost fluctuations.

3. Improves Supplier Collaboration

Costing transparency fosters trust and better negotiations with suppliers.

4. Optimizes Pricing Strategies

Accurate cost estimation ensures competitive and profitable pricing.

5. Supports Regulatory Compliance

Many industries face strict CO₂ reporting requirements. Product costing software helps track carbon footprint alongside costs.

Tset: A Smarter Product Costing Software for Manufacturers

Tset is an advanced product costing solution designed to help manufacturers optimize costs and streamline procurement strategies.

What Makes Tset Unique?

• Automated Cost Calculations: Instantly performs should-cost analysis, eliminating guesswork and ensuring accurate, data-driven pricing decisions for every component and assembly.
• Real-Time Cost Simulation: Empowers manufacturers to test multiple cost scenarios in real time, providing a clear view of the financial impact of design changes, supplier choices, and production variables before committing resources.
• Centralized Knowledge Management: Consolidates cost data, historical pricing trends, and supplier insights in a structured and transparent system, ensuring that all stakeholders have access to accurate, up-to-date information for informed decision-making.
• Enhanced Collaboration: Breaks down silos between cost engineering, procurement, and product development by offering a single source of truth, enabling cross-functional teams to align on cost strategies and make informed trade-offs.
• Ease of Use & Intuitive Interface: Offers a user-friendly interface with interactive dashboards and real-time analytics, reducing complexity and accelerating adoption across teams.
• CO₂ Footprint Tracking: Integrates cost and sustainability calculation, allowing manufacturers to assess CO₂ impact alongside production costs and make environmentally responsible sourcing decisions without compromising profitability.