[email protected] acoste seminar, 17th february 2004 data and information in cost engineering dr....
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ACostE Seminar, 17th February 2004
Data and Information in Cost Engineering
Dr. Rajkumar Roy
Cranfield UniversityDecision Engineering Solutions Limited
ACostE Seminar, 17th February 2004
Cost Data and Information: Challenges !
We have plenty of data!
Lacks right structure!
Not enough!
ACostE Seminar, 17th February 2004
Cost Data and Information: Challenges !
Many OEM’s are losing product realisation knowledge !
ACostE Seminar, 17th February 2004
Opportunities !
Collaboration!
Structured Cost Data Collection!
Benchmark Database!
Enterprise Resource Planning (ERP) software
ACostE Seminar, 17th February 2004
Types of cost estimates vs Product Realisation
20
40
60
80
100
0
-20
-40
-60
Class 1 Class 2 Class 3 Class 4 Class 5
Rough Order of Magnitude
Feasibility studies Preliminary estimate Definitive estimate Detailed Estimates
Worst range of expected accuracy
Best range of expected accuracy
Project Phases
Per
cen
tag
e ex
pec
ted
err
or
Calendar Time (No Scale)
A B C D E F
Product Realisation
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
ACostE Seminar, 17th February 2004
Each Cost Engineering Technique requires different type of data and
information...
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
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
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
ACostE Seminar, 17th February 2004
Capturing Cost Data and Information:The Cranfield Approach !
• Questionnaire
• Interviews
• Activity Capture & Categorisation– XPat– IDEF3– UML
ACostE Seminar, 17th February 2004
eXpert Process Knowledge Analysis Tool (Xpat)
• Knowledge elicitation
• Based on IDEF modelling techniques
• Process driven methodology
• Easy to use
ACostE Seminar, 17th February 2004
INPUT PROCESS OUTPUT
INTERNAL EXTERNAL
TOP LEVEL VIEW
WEEKLY PLANNING
DAILY SCHEDULING
Xpat - Process Knowledge Capture Framework
ACostE Seminar, 17th February 2004
OUTPUT
TOP LEVEL VIEW
WEEKLY PLANNING
DAILY SCHEDULING
1.3Physical OutputsResultsInformationDeliverablesProducts, StatesNon-PhysicalOutputsPhone calls
Destination ofOutputsPersonEquipment
Frequencyof Outputs Hourly Daily, WeeklyMonthlyYearlyAs and When
1.1 1.2 1.3
Xpat - Process Knowledge Capture Framework
ACostE Seminar, 17th February 2004
Xpat - Output Probe Questions
ProbeIdentity
Probe Questions Rationale for a probe question
O1 List all output from theprocess?
To identify specific outputs from the processin terms of information deliverables statesproduct and results. To define types ofoutput. To provide support for constructingIDEF0 process model.
O2 Why would you need thatoutput?
To generate rules for output information.IF <condition> THEN <action>
O3 How would you get thatoutput?
To determine acquisition or reuse process.
O4 How would you use thatoutput?
To generate detail level rules.IF <condition> THEN <action>
O5 What is the source ofoutput?
To identify sources of output and interactions
O6 When would yougenerate this output?
To reveal specific or generic frequency ofoutputsTo generate a detail level rule specific orgeneric output. IF <condition> THEN<action>
O7 What is the frequency ofoutput?
To determine the dynamic nature of output(e.g. time relative to output – Hourly, Daily,Weekly, as and when required)
ACostE Seminar, 17th February 2004
INPUT
INTERNAL EXTERNAL
TOP LEVEL VIEW
WEEKLY PLANNING
DAILY SCHEDULING
Physical andNeeds, StatesInformationProblemMaterialNon-PhysicalInputsPhone calls
Source ofInputsPersonEquipment
Frequencyof inputs Hourly, Daily, WeeklyAs and When
1.1 1.2 1.3
Knowledge Capture Framework
ACostE Seminar, 17th February 2004
PROCESS INTERNAL EXTERNAL
TOP LEVEL VIEW
WEEKLY PLANNING
DAILY SCHEDULING
1.1 1.71.61.51.41.31.2 1.8
ActivitiesDescriptionof one stepof the problemsolvingprocesslinkinginput(s)and output(s)
Tasks What to do?
MethodsHowto do it?
EnablersHRToolsEquipmentSystemsFacilities
MetricsHow do you knowyou haveachievedthe task?
AssumptionsWhat are believesideaproof thatthe processis true/falsereasoning?
FAQ’s
GuidesStandardsPoliciesRulesEvents
Knowledge Capture Framework
ACostE Seminar, 17th February 2004
Capturing Cost Data and Information for Detailed Estimating ...
ACostE Seminar, 17th February 2004
Work Breakdown Structure (WBS)
Product Management
Tooling and Equipment
Components and Parts
Inspection and Test
Fabrication
Packaging and Shipping
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!
ACostE Seminar, 17th February 2004
Total Part Cost
Materials Factory Value-Added General
Overheads
Direct Labour Indirect Labour
Level
Machine Cost Tooling Cost
+ Tool Lifetime
+ Tool Purchasing Cost
+ Tool Specifications
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
ACostE Seminar, 17th February 2004
ERP: A source of Cost Data and Information
HUMAN HUMAN RESOURCERESOURCE SALES/ MARKETINGSALES/ MARKETING
FINANCEFINANCE
ERPERP
MANUFACTURINGMANUFACTURING
Production planning/control
Pricing and BillingPersonnel Administration
General ledgers
ACostE Seminar, 17th February 2004
Cost Estimating using SAP
Quantity structure
BOM RoutingPrices for: •Material•Activities•Overhead•Processes
Value structure
++
AnalysisPricingValuationPAControlling
Costing
Ana
lysi
sItemizationMaterial £Material £Activity £Overhead £Processes £
Cost elements
£,£,£
Results
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
ACostE Seminar, 17th February 2004
Collecting Cost Data and Information for Parametric Estimating
ACostE Seminar, 17th February 2004
CASE STUDYMetallic Parts
LONGERON
RADAR FRAME
SPIGOT FRAMES
ACostE Seminar, 17th February 2004
40% OF COSTS
3D Model3D ModelIndependent Independent
VariableVariable
Independent Independent VariableVariable
Independent Independent VariableVariable
Conceptual Conceptual StageStage
‘‘A’ SchemesA’ Schemes
DECOMPOSEDECOMPOSE
3D Model3D Model
File SizeFile Size
CSG TreeCSG Tree
GeometryGeometry LinesArcsCurvesPointsShapes
Primitives Nodes
Data tableIndex
Est. Direct Cost
Quantitative Cost Drivers
ACostE Seminar, 17th February 2004
•Old Customer•Existing Aircraft
•Futuristic Aircraft•New Customer
•Project Size•Experience of design domain
CATIA CompetencyDesign Experience
New MaterialsNew TechnologyNew Processes
Totally New DesignSimple 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
ACostE Seminar, 17th February 2004
Cost Estimating Relationships (CER)
Total Time = QN Time + QL 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
ACostE Seminar, 17th February 2004
QUALTITATIVE DATA: Problem!
For a less experienced designer :
High Complex Part
Low Complex Part
+ 50 %
+ 30 %
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
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.
