In the highly competitive automotive industry, controlling costs across the entire product lifecycle—from design and development to production, sales, and aftersales—is crucial for maintaining profitability and market leadership. Product Lifecycle Costing (PLC) is a strategic approach that enables automotive companies to accurately estimate, monitor, and manage costs throughout every phase of a vehicle’s lifecycle. SAP for Automotive provides integrated tools and processes to support effective PLC, empowering businesses to make informed decisions and optimize financial performance.
Product Lifecycle Costing involves calculating the total cost incurred during a product's entire lifecycle. This includes initial research and development (R&D), prototyping, manufacturing, logistics, marketing, service, and disposal or recycling. Unlike traditional cost accounting, which often focuses on individual departments or phases, PLC provides a holistic view of costs, enabling better cost control and value optimization.
Automotive products, especially vehicles, have long and complex lifecycles involving multiple stakeholders, including OEMs (Original Equipment Manufacturers), suppliers, dealers, and service centers. Cost pressures arise from increasing material costs, fluctuating commodity prices, stringent regulatory requirements, and rising customer expectations for quality and features.
Effective lifecycle costing helps automotive companies:
SAP offers a comprehensive framework to implement Product Lifecycle Costing through its integrated suite of solutions:
SAP’s PLM system captures detailed data on design changes, engineering bills of materials (EBOM), and manufacturing bills of materials (MBOM). This integration ensures cost estimations consider every component and process from the earliest stages, enabling early cost visibility and proactive cost management.
SAP ERP modules provide real-time tracking of actual costs incurred in procurement, production, and logistics. This enables comparison of planned versus actual costs, helping identify deviations early and implement corrective actions.
SAP supports sophisticated costing methods, such as activity-based costing (ABC) and target costing, which are vital for understanding cost drivers and setting achievable cost targets during product development.
Through integration across SAP modules—including finance, controlling, supply chain, and sales—companies gain end-to-end visibility into cost components and their impact on profitability.
Advanced SAP tools powered by machine learning and analytics allow automotive companies to simulate cost scenarios based on different design choices, supplier selections, or production plans, enabling data-driven decision-making.
By linking cost data across the product lifecycle, companies reduce guesswork and improve the accuracy of cost estimates, enabling more reliable financial planning.
Early visibility of lifecycle costs allows design and engineering teams to choose cost-effective materials and processes without compromising quality or compliance.
By identifying cost-saving opportunities early and monitoring costs continuously, automotive companies can enhance margins and improve return on investment (ROI).
Integrated SAP solutions facilitate communication between design, manufacturing, procurement, and finance teams, aligning cost management goals across departments.
PLC helps track the cost impact of environmentally friendly materials and processes, supporting sustainability initiatives while maintaining cost discipline.
Product Lifecycle Costing is a critical capability for automotive companies aiming to control costs and improve profitability in an increasingly complex market. SAP for Automotive offers robust, integrated tools that enable accurate lifecycle costing, from early product design through manufacturing and aftersales. By leveraging SAP’s comprehensive platform, automotive businesses can achieve greater cost transparency, optimize decision-making, and sustain competitive advantage over the entire product lifecycle.