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Data and Information in Cost Engineering

Data and Information in Cost Engineering. Dr. Rajkumar Roy Cranfield University Decision Engineering Solutions Limited. I want 5% Cost Reduction this year!. Time is changing. Fact based Negotiation !. Cost Data and Information: Challenges !. We have plenty of data!.

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Data and Information in Cost Engineering

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  1. Data and Information in Cost Engineering Dr. Rajkumar Roy Cranfield University Decision Engineering Solutions Limited ACostE Seminar, 17th February 2004

  2. I want 5% Cost Reduction this year! ACostE Seminar, 17th February 2004

  3. Time is changing ... ACostE Seminar, 17th February 2004

  4. Fact based Negotiation ! ACostE Seminar, 17th February 2004

  5. Cost Data and Information: Challenges ! We have plenty of data! Lacks right structure! Not enough! ACostE Seminar, 17th February 2004

  6. Cost Data and Information: Challenges ! Many OEM’s are losing product realisation knowledge ! ACostE Seminar, 17th February 2004

  7. Opportunities ! Collaboration! Structured Cost Data Collection! Benchmark Database! Enterprise Resource Planning (ERP) software ACostE Seminar, 17th February 2004

  8. Project Phases A B C D E F Percentage expected error 100 Worst range of expected accuracy 80 Best range of expected accuracy 60 40 20 0 -20 -40 Rough Order of Magnitude Feasibility studies Preliminary estimate Definitive estimate Detailed Estimates -60 Class 1 Class 2 Class 3 Class 4 Class 5 Calendar Time (No Scale) Types of cost estimates vs Product Realisation Product Realisation ACostE Seminar, 17th February 2004

  9. Cost Engineering Techniques • Parametric estimating • Bottom up Detailed estimating • Activity Based approach • Expert judgement/rule of thumb (subjectivity), used within all approaches • Analogy • Cost risk analysis ACostE Seminar, 17th February 2004

  10. Each Cost Engineering Technique requires different type of data and information... ACostE Seminar, 17th February 2004

  11. Sources of Cost Engineering Data • Engineering Drawings • Bills of Materials • Process/Routing Sheets • Master Production Schedules • Accounting Records • Supplier and Catalogue information • Labour Rates and Standard time Data • Repair and Maintenance Schedules • ERP Systems ACostE Seminar, 17th February 2004

  12. Team Members • Need experience • Should be carefully selected to ensure reliable cost data is obtained • Design and technical experts can provide: • Design and Development costs/estimates • Manufacturing and Assembly experts can provide: • Equipment, tooling, material, production, and in-process handling costs/estimates ACostE Seminar, 17th February 2004

  13. Team Members cont. • Industrial Engineers can provide: • Quality control, reliability, and production volume based on standard times • Shipping and Warehouse experts can provide: • Material handling, storage policies, packaging, receiving and shipping costs • Accountants can provide • Overhead, administrative, and related cost figures • Marketing can provide • Distribution and Marketing costs ACostE Seminar, 17th February 2004

  14. Capturing Cost Data and Information:The Cranfield Approach ! • Questionnaire • Interviews • Activity Capture & Categorisation • XPat • IDEF3 • UML ACostE Seminar, 17th February 2004

  15. eXpert Process Knowledge Analysis Tool (Xpat) • Knowledge elicitation • Based on IDEF modelling techniques • Process driven methodology • Easy to use ACostE Seminar, 17th February 2004

  16. TOP LEVEL VIEW INPUT PROCESS OUTPUT INTERNAL EXTERNAL WEEKLY PLANNING DAILY SCHEDULING Xpat - Process Knowledge Capture Framework ACostE Seminar, 17th February 2004

  17. TOP LEVEL VIEW OUTPUT 1.1 1.2 1.3 Physical Outputs Results Information Deliverables Products, States Non-Physical Outputs Phone calls WEEKLY PLANNING Destination of Outputs Person Equipment 1.3 Frequency of Outputs Hourly Daily, Weekly Monthly Yearly As and When DAILY SCHEDULING Xpat - Process Knowledge Capture Framework ACostE Seminar, 17th February 2004

  18. Xpat - Output Probe Questions ACostE Seminar, 17th February 2004

  19. TOP LEVEL VIEW INPUT INTERNAL EXTERNAL 1.3 1.1 1.2 WEEKLY PLANNING Physical and Needs, States Information Problem Material Non-Physical Inputs Phone calls Source of Inputs Person Equipment Frequency of inputs Hourly, Daily, Weekly As and When DAILY SCHEDULING Knowledge Capture Framework ACostE Seminar, 17th February 2004

  20. TOP LEVEL VIEW PROCESS FAQ’s INTERNAL EXTERNAL 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Tasks What to do? Enablers HR Tools Equipment Systems Facilities Activities Description of one step of the problem solving process linking input(s) and output(s) Methods How to do it? Guides Standards Policies Rules Events Metrics How do you know you have achieved the task? Assumptions What are believes idea proof that the process is true/false reasoning? WEEKLY PLANNING DAILY SCHEDULING Knowledge Capture Framework ACostE Seminar, 17th February 2004

  21. Cost Estimating Model ACostE Seminar, 17th February 2004

  22. Capturing Cost Data and Information for Detailed Estimating ... ACostE Seminar, 17th February 2004

  23. Work Breakdown Structure (WBS) • Product Management • Tooling and Equipment • Components and Parts • Inspection and Test • Fabrication • Packaging and Shipping ACostE Seminar, 17th February 2004

  24. Different projects use different WBS!Organising data into a common structure for similar products can be very helpful in cost engineering! ACostE Seminar, 17th February 2004

  25. Total Part Cost Materials Factory Value-Added General Overheads Machine Cost Direct Labour Indirect Labour Tooling Cost Level + Tool Lifetime + Tool Purchasing Cost + Tool Specifications ACostE Seminar, 17th February 2004

  26. Materials Raw Materials Bough Out Parts Material Overhead Material Usage + Standard Bought Cost + Part Dimensions + Raw Material Out Part Specification + Bought Out Material + Raw Materials Usage Specification + Subcontract Item Inventory Cost + Standard Bought Out Part Specification + Raw Material Quantity Inventory Cost + Subcontract Item Quantity + Weigh of the Part Bough Out Part Scrap Raw Material Rate Raw Material Scrap Bough Out Part Rate + Volatility of the Raw + Raw Material Scrap + Standard Bought Out Part Material Resale Value Rate + Subcontract Item Rate ACostE Seminar, 17th February 2004

  27. General ledgers Production planning/control MANUFACTURING FINANCE HUMAN RESOURCE Personnel Administration Pricing and Billing ERP SALES/ MARKETING ERP: A source of Cost Data and Information ACostE Seminar, 17th February 2004

  28. Quantity structure BOM Routing Value structure + • Prices for: • Material • Activities • Overhead • Processes Costing Results Itemization Material £ Material £ Activity £ Overhead £ Processes £ Cost elements £,£,£ Analysis Pricing Valuation PA Controlling Analysis Cost Estimating using SAP ACostE Seminar, 17th February 2004

  29. ACostE Seminar, 17th February 2004

  30. Few Observations: Always check data for relevance and physical significance of Data and Information Benchmark databases are necessary for different industries Use structured templates to collect data ACostE Seminar, 17th February 2004

  31. Collecting Cost Data and Information for Parametric Estimating ACostE Seminar, 17th February 2004

  32. LONGERON RADAR FRAME SPIGOT FRAMES CASE STUDYMetallic Parts ACostE Seminar, 17th February 2004

  33. Independent Variable 3D Model 3D Model Independent Variable Geometry Lines Arcs Curves Points Shapes Primitives Nodes DECOMPOSE CSG Tree Independent Variable File Size Data table Index Conceptual Stage ‘A’ Schemes 3D Model 40% OF COSTS Quantitative Cost Drivers Est. Direct Cost ACostE Seminar, 17th February 2004

  34. Old Customer • Existing Aircraft • Futuristic Aircraft • New Customer Qualitative Cost Drivers Categories for Rating CATIA Competency Design Experience • Ease of Customer Req. Capture Estimated Indirect Cost • Designer’s experience / skill level • Intricacy of parts design • Project Size • Experience of • design domain • Likelihood of Eng. Changes • Simplicity of Requirements New Materials New Technology New Processes • % of new design / modification • Ease of interface Totally New Design Simple Modifications 60% OF COSTS Expertise ACostE Seminar, 17th February 2004

  35. Sample Data - Frames ACostE Seminar, 17th February 2004

  36. Feature Approach Cost Estimating Relationships (CER) Total Time = QN Time + QL Time + Allocations Total Time = C11 + C12(Mass) + C13(Surface Related) + Allocations CATIA Approach Total Time = C14 + C15(Mass) + C16(Surface Related) + Allocations C11 … C16 are constants ACostE Seminar, 17th February 2004

  37. For a less experienced designer : High Complex Part + 50 % Low Complex Part + 30 % QUALTITATIVE DATA: Problem! ACostE Seminar, 17th February 2004

  38. Learning Outcomes! • Understand the design process • Do not mix too dissimilar products • Collect as much data as possible • Verify the quantitative data for physical significance • Cross check the qualitative data, take more opinions • Educate designers about quantitative and qualitative cost drivers • Do not depend entirely on statistical analysis to develop the relationships, use common sense and experience too • Identify Risk • Do not use too many variables within the CERs • Do not mix the quantitative and qualitative cost drivers • Always validate the CERs for physical significance ACostE Seminar, 17th February 2004

  39. Concluding Remarks Cost Estimating with good quality Data and Information is becoming very important Benchmark Databases are required A structured approach to Data Collection and Analysis is the key to success ERP systems could provide good quality Data and Information for Cost Engineering. ACostE Seminar, 17th February 2004

  40. Thank You! www.cranfield.ac.uk/sims/cost ACostE Seminar, 17th February 2004

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