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

2. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 I want 5% Cost Reduction this year!

3. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Time is changing...

4. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Fact based Negotiation !

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

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

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

8. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Types of cost estimates vs Product Realisation 20 40 60 80 100 0 -20 -40 -60 Class 1Class 2Class 3Class 4Class 5 Rough Order of Magnitude Feasibility studiesPreliminary estimateDefinitive estimateDetailed Estimates Worst range of expected accuracy Best range of expected accuracy Project Phases Percentage expected error Calendar Time (No Scale) ABCDEF Product Realisation

9. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 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

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

11. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 –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 Sources of Cost Engineering Data

12. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 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

13. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 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

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

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

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

17. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 OUTPUT TOP LEVEL VIEW WEEKLY PLANNING DAILY SCHEDULING 1.3 Physical Outputs Results Information Deliverables Products, States Non-Physical Outputs Phone calls Destination of Outputs Person Equipment Frequency of Outputs Hourly Daily, Weekly Monthly Yearly As and When 1.11.21.3 Xpat - Process Knowledge Capture Framework

18. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Xpat - Output Probe Questions

19. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 INPUT INTERNAL EXTERNAL TOP LEVEL VIEW WEEKLY PLANNING DAILY SCHEDULING 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 1.11.2 1.3 Knowledge Capture Framework

20. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 PROCESS INTERNAL EXTERNAL TOP LEVEL VIEW WEEKLY PLANNING DAILY SCHEDULING 1.11.71.61.51.41.31.21.8 Activities Description of one step of the problem solving process linking input(s) and output(s) Tasks What to do? Methods How to do it? Enablers HR Tools Equipment Systems Facilities Metrics How do you know you have achieved the task? Assumptions What are believes idea proof that the process is true/false reasoning? FAQ’s Guides Standards Policies Rules Events Knowledge Capture Framework

21. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Cost Estimating Model

22. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Capturing Cost Data and Information for Detailed Estimating...

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

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

25. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Total Part Cost MaterialsFactory Value-AddedGeneral Overheads Direct LabourIndirect Labour Level Machine Cost Tooling Cost + Tool Lifetime + Tool Purchasing Cost + Tool Specifications

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

27. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 ERP: A source of Cost Data and Information HUMANRESOURCE SALES/ MARKETING FINANCE ERP MANUFACTURING Production planning/control Pricing and BillingPersonnel Administration General ledgers

28. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Cost Estimating using SAP Quantity structure BOMRouting Prices for: Material Activities Overhead Processes Value structure + + Analysis Pricing Valuation PA Controlling Costing Analysis Itemization Material£ Activity£ Overhead£ Processes£ Cost elements £,£,£ Results

29. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004

30. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 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

31. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Collecting Cost Data and Information for Parametric Estimating

32. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 CASE STUDY Metallic Parts LONGERON RADAR FRAME SPIGOT FRAMES

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

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

35. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Sample Data - Frames

36. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 Cost Estimating Relationships (CER) Total Time = Q N Time + Q L Time + Allocations Feature Approach Total Time = C11 + C12(Mass) + C13(Surface Related) + Allocations CATIA Approach Total Time = C14 + C15(Mass) + C16(Surface Related) + Allocations C11 … C16 are constants

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

38. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 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

39. cost@cranfield.ac.uk ACostE Seminar, 17th February 2004 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.

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