Using cost-time profile to estimate the product direct cost in multi-production value stream

The accurate estimation of product costs, as one of the aspects of competitive priorities has always been a matter of great importance and delicacy in regards of manufacturers approach towards competitors and customers. The efforts made in this paper are aimed at product direct cost (PDC) estimation for multiple production stream different from the approaches are used in accounting systems. On this basis both factors of cost and time in PDC are studied using lean thinking approach, value stream mapping and cost‐time profile techniques. The main difference between accounting methods and the present method of PDC estimation is that not only the costs are estimated based on the longest lead time, but also the time value of money is considered in both PDC of parts manufactured and the final product, which is not seen in any of other methods. Cost estimation based on cost‐time investment shows that the later the cost spent on production is recovered by the manufacturer, there will be more increase in the product costs and consequently in final price of the product. To illustrate the efficiency and applicability of the proposed method, it is also applied into a real case in a parts manufacturing company in Iran.