By Thomas R. Cutler
Many of the world’s largest and most successful manufacturing organizations need to identify part cost reduction opportunities throughout the product development lifecycle, leading to millions of dollars in cost savings.
According to Thomas Charkiewicz, President of MTI Systems, the leading cost estimating software firm since 1982, “Software solutions such as Costimator OEM allow companies to quickly and easily identify the cost drivers in the products they design, manufacture, and procure. This valuable information is then used to explore design alternatives and methods of manufacture that lead to lower cost products with higher profit margins.”
One of the key differentiators among various cost estimating technology solutions is the scope and depth of the data library. The greater the substance of real-world manufacturing data the more valuable and accurate the software will be to the end-users. Some of the minimum metrics to expect for optimal cost estimating software data libraries include:
- 200+ Process Cost Models
- 2,500+ Work Centers
- 3,500+ Parametric Models
- 2,400+ Materials
- 3,400+ Labor & Machine Handling Standards
- Work Center Shop Rates for several dozen countries
The key to any estimating tool is the reliability of the data it contains. Charkiewicz noted that as a best of breed cost estimating solution, “Over 95% of the data residing in our database library comes from MTI customers, which includes over 1,000 suppliers and OEM’s. The accumulation of this data over the past twenty eight years is validated during system implementation and then added to the OEM database library. This information is shared with users on support through regular software updates.”
Charkiewicz noted that there are different database libraries needed for high functioning cost-estimation. The Work Center Database allows the user to store and maintain data about their machines or departments. It includes the labor and burden rates for set-up and cutting times. This database also allows for operator fatigue, machine capabilities for performance and operator standards outside the machine cycle.
MTI Systems IQBuilder Database allows the user to store and retrieve data into an estimate in two different methods. Using the list method, data will come directly from the tables of manufacturing times and costs that have been built into the database, performing a linear calculation to arrive at the manufacturing time and cost. Using the chart method, data will be derived from a regression analysis. The database within a millisecond finds the curve that best fits, and calculates the time or cost.
The Standards Database is essential in any cost estimating solution because it allows the user to store and maintain Labor and Machine Handling Standards. The data may be per piece or per job in hours, minutes, and seconds. This time will then be added to the machine cycle time to develop the manufacturing time. These databases come with thousands of pre-determined elements. These elements are assigned to Machine/Work Centers as needed. The user must be able to add or delete elements from this database as needed.
Other cost estimating databases often found in cost estimating solutions include Customer Database, Vendor Database, Purchased Items Database, Material Database, Gage Database, Gage Frequency Database, Fixture Database, Material Handling Database, and Engineering database.
Charkiewicz commented about the importance of a Plant Database, “It allows the user to link cost information such as purchase items, material costs and labor rates to individual plants. Plants can be used to store information on in-house manufacturing facilities or those of suppliers for the purpose of making cost comparison based on differences in costs and process capabilities.”
Estimating Options
Bottoms-Up: An extensive data library contains the exact machine and labor times needed to produce cost estimates that are consistent with actual manufacturing times. This allows an enterprise to account for the time and cost of each operation. A complete, detailed cost breakdown analysis is developed, allowing executives to identify what products “should cost”.
Parametric: Parametric cost models are generated through regression analysis tables. Models can be developed for single or multiple level parts and assemblies.
OEM Organizational Benefits to Best Cost Estimation
Design elements must allow the company to determine the most cost effective designs while assessing the trade off cost factors with other product attributes. The result is the ability to redesign parts at lower costs.
Manufacturing costs can also be analyzed examining current process methods, times and costs as well as accurate calculations of prototype and production costs.
Procurement is able to utilize “Should Cost” models for negotiations with suppliers as well as find the best process-supplier match.
Product Management is able to meet cost targets for new programs through effective cost estimation as well as reduce cost of programs in production. Finally companies are able to maintain an accurate current cost roll-up of all programs.
In a lean environment when companies are looking to eliminate waste, effective cost estimation solutions may well present the best opportunities for major financial cost savings.