Cost Management for Discrete Part Manufacturing

Today’s NPI (new product introduction) process is cross-functional, including internal functions and external suppliers or partners. Product and target costs are key components and central to daily decisions. An NPI infrastructure should include mechanisms for providing data collaboratively and continuously to all who need them as a product moves from concept to launch.

Costing approaches use such methodologies as simple weight-based assessments, “like component” comparisons, and detailed routings using activity based costing systems. Some are better than others; trade-offs exist between the level of cost detail and the time spent obtaining the information.

Cost-estimating early in the NPI process is important. More than 70% of final product costs are typically determined by early design decisions. However, engineers generally use few cost-estimating tools. A practical costing tool used must be accurate, flexible, simple, timely, and economical.

For many manufacturing firms, launching products over cost target is the rule. A solution must provide seamless cost analysis from early concept to full production and delivery after launch. A viable cost management solution must support all stages and functions of the organization throughout the entire product lifecycle.

A cost management platform
The primary function of a cost management platform is to collaboratively identify, assess, reduce, avoid, or recover material, tooling, labor, and overhead costs in discrete part manufacturing companies. Since a high percentage of cost is committed early, and only a small portion can be affected later, the cost management architecture must generate accurate cost predictions early and providing timely information to the cost community. It is necessary to integrate directly into the CAD environment and leverage its geometry information to automate cost analysis and close the loop, not only for the design function but the entire NPI community.

Figure 1 shows a simplified system diagram of a cost management platform. At its heart is a cost modeling and calculation engine. As the designer uses the CAD system, the cost modeling engine automatically derives and extracts geometric cost drivers (GCDs), interrogating the cost management database to obtain necessary information about potential manufacturing facilities or suppliers, non-geometric cost drivers (n-GCDs), and returning the current manufacturing cost estimate to the designer. The process is repeated with each revision. All in the cost community have access and input to the process and receive feedback as cost estimates change.

Figure 1

Real-time CAD integrated cost management
Engineering has the most impact on cost in the conceptual phase. A real-time CAD integrated costing environment gives the designer an interactive tool for what-if trade off’s between design and cost. Cost becomes a fourth element in the form, fit, and function balancing act and becomes an inherent and actively used attribute in the design process. A designer must understand the interactions of all four. This requires real time cost feedback in an integrated CAD environment.

The feedback returns summary cost information: material cost, labor cost, machine overhead cost, capital tooling, and overall total cost per part. Each time the design is modified, everyone involved can see the cost-relevant results of that design decision. Real-time integrated costing creates a powerful environment for what-if analysis, while supporting a creative and productive design process.

Geometric and non-geometric cost drivers; cost modeling
Three factors must be considered to accurately predict costs during a product design lifecycle:

• Geometric cost drivers (GCDs), which account for part sizes and shapes as they evolve through the design process;



• Non-geometric cost drivers, which account for production facilities where the parts will be manufactured including capabilities, capacities, and cost structures; and



• A cost model, which represents the appropriate cost accounting methodologies used by the manufacturer.

Geometry assessment—GCDs provide an abstraction of the cost drivers based on part geometry and cost information for use outside the CAD environment. For example, GCD data for a sheet metal part include holes, cutouts, bends, and part thickness. GCDs for turned parts include grooves, bores, faces, shoulders, and threads. Only a small amount of data is needed to define a part, especially if the major process group is known.

Production facilities—Non-GCDs characterize the production facility. They include unique cost drivers such as labor rates, overhead rates, machine tool parameters, routings, and raw material parameters.

Cost modeling—The cost model needs to use GCD and n-GCD information. The ideal approach would be to calculate manufacturing process time, then convert time to cost. The time models need to describe the physical activities that occur on each machine. There are two components for each process:

• Physical time models that simulate the step-by-step actions of the machine as it produces a part;



• Labor time models that account for the less-deterministic times associated with manual operations.

Conclusion
A CAD-integrated cost management solution is required to provide timely product cost information throughout the NPI process. In real time, the solution needs to compute individual part costs and complete the roll-up of costs from sub-assembly level through the complete product.

Costs need to be computed at any stage of the NPI process to provide access to information to collaborate on, analyze, report, and manage product costs. Traditional cost estimation techniques require hours to generate and are often inaccurate or invalid if changes are made. A modern cost management platform must provide fast cost estimates and automatic updates, allowing changes to made early in the development cycle when they are less expensive.

By providing real-time, predictive cost estimates throughout the NPI process, CAD-integrated cost management helps produce better decisions that reduce, avoid, or recover product costs. It gives designers instantaneous cost, offers valuable “should cost” data to procurement, and provides production level costs to manufacturing, months or years before production occurs.

Michael Philpott, Ph.D., is co-founder and CTO for aPriori. Eric Hiller is co-founder and director of business development for aPriori. aPriori develops cost management software solutions for the discrete manufacturing. www.apriori.com