A Study of Bid Price and Life Cycle Cost Calibration using Target Costing Model for Defence Manufacturing in India
The defence industry of India is among its extremely important and strategic industries as it relates to the security of the country. India holds the advantage of having the second largest numbers in armed forces in the world by active military personnel in 2018 (Dilinger, 2018). However, the defence manufacturing sector in the country is still heavily dependent on arms imports, making India the largest importer of conventional defence equipment’s. Moreover, the government is actively pushing domestic manufacturers to have competitive advantages in bidding, winning, executing, maintaining and ensuring all time performance of defence equipment. It is the opinion of the industry experts that the role and function of private enterprises in the industry cannot be utilized without efficient and viable financial models that cater to its strategic needs. This study investigates the management practices of these most vital industries of India and proposes to do integrated Bid Price and Life Cycle Cost calibration using “Target Costing” model for defence manufacturing in India. It is expected that the proposed model on life cycle management will be able to generate an information system which are contemporary, active and self-solving. This study also analyzes the Indian government defence procurement process and its relationship with proposed model. Finally, the proposed calibration excel working tool is tested by Indian Leading Defence Manufacturing companies and endorsed that the Target costing practices are able to support Indian Defence equipment manufacturer in participate and forming internationally competitively bid for the defence tenders. This research also highlighted future scope of further testing other models depending on size and complexity of industry and its defence products.
Keywords - Target Costing, Life Cycle Management in Defence, Pricing in Defence, Defence Procurement Process.