New Product Development (NPD) process has undergone revolutionary changes during the past few years due to global economic policies. The organizations have made their manufacturing systems flexible and agile to adapt to changing customer needs. However, with ever increasing demand on lower prices, the NPD process is under constant pressure today to deliver products at lowest possible cost. Target Costing (TC) has emerged as one primary tool backed by conventional NPD tools like Value Engineering (VE), Quality Function Deployment (QFD) and Design For Manufacture (DFM) to facilitate the manufacturer in this emerging economic scenario. The primary objective of this work is to study the influence of Value Engineering on Target Costing process. The case of an Indian Auto manufacturer has been taken up and a Target Costing process aided by Value Engineering has been applied. The approach and results have been discussed in this paper.

The new economic policies and revolutionary liberalization has made competition to reach heights that were never seen before. Globalization has opened up fantastic opportunities for the Indian industries. Nevertheless, the Indian manufacturers are witnessing a bewildering scene where the products with best quality and least cost alone can survive. With this scenario, a paradigm shift is required in the approach of manufacturers towards cost management.

With markets opened to all and having lean and flexible manufacturers worldwide, cutting cost and becoming cheaper is vital to become market leader. A case of an Indian auto component (Air-horn) manufacturer has been taken up in this work. A target cost was set, based on market conditions and the same has been achieved through a structured Value Engineering approach.Cooper and Slagmulder [12] define Target Costing as “a structured approach to determine the life cycle cost at which a proposed product with specified functionality and quality must be produced to generate the desired level of profitability over its life cycle when sold at its anticipated selling price”.