by Bill Williamson
| October 17, 2016
In my first blog of this series I introduced you to the Four Pillars of the Affordability Process. They are:
1. Management Support
In this fifth blog I write about the Fourth Pillar; Tools/Automation, teaching you what I have learned over the past 25 years as an Affordability Manager and Cost Estimator.
Now that Management Support is in place, a written Methodology has been published giving Affordability the legitimacy it needs, responsibilities delineated, and templates to follow, and both Management and Design IPT Members have been trained, it is time to focus on the tools, automation, and support personnel required to make an Affordability Program successful.
An important part of the Affordability Process is estimation of the product design. The earlier a design is estimated the easier it is to establish and assign cost goals within a program. There is an optimum window of opportunity for estimating cost and assigning cost goals (Figure 1); the earlier, the better. To support accurate estimation, the Affordability Team should use tools (either manual or automated) designed to estimate cost accurately with the data available to them.
Figure 1. Window of Opportunity
The estimating tools that are used in support of Affordability will vary depending on the phase of the program (Figure 2). During early program phases such as Concept Development and Position to Win, it is best to use a parametric tool because the detailed data and information available is normally scarce. Parametric tools use parameters such as weight, manufacturing complexity, and quantity to estimate cost at a very high level. This is where the PRICE TruePlanning Suite is the most useful.
Figure 2. Program Phase Estimating
The PRICE TruePlanning Suite is built around industry data collected and normalized over 46 years (developed into a database that is continually updated) that helps to account for any lack of information. The tool uses industry standards to develop an accurate estimate with little input.
As a design concept begins to become more solidified, comparative and factored costing often comes into play. Comparative and factored costing uses similar products to the new design to estimate the new designs cost. Since the new design is similar to an older, produced design, the actual cost of the older design can be used to estimate the new design cost. Factored costing estimates that the new design will cost a certain percentage more or less than the old design. The factors estimated can be used to estimate the cost or labor hours of the new design. The PRICE TruePlanning Suite allows the user to use multipliers within the tools to account for factoring. Often, a bottom-up estimate will use factored costing in an initial estimate.
As more program data is collected and the product description and design become more detailed, the estimating tool of choice often switches to a detailed, bottom-up focused tool such as Tecolote’s ACEIT Tool Set or even an EXCEL Spreadsheet. A bottom-up estimating tool uses more and more details from an actual design as inputs to the cost estimating tool. These details often include a complete bill of material, exact weights, product dimensions, specific production processes, material quotes or purchase orders, and planned labor hours. The PRICE TruePlanning Suite can also be updated with detailed data to be used as a bottom-up estimating tool. The extra benefit of using PRICE TruePlanning is that it fills in automatically any information and data that is unknown or not accounted for.
Ultimately, an estimating suite such as PRICE TruePlanning streamlines the estimating process, saving time and money, and provides an accurate estimate at either a high level with little data, or at a low level with copious amounts of data.
Use of cost estimating tools is a specialty. This specialty service should be, and is most often, provided by a trained cost estimator or Affordability expert. This person is normally designated as the program’s Affordability Manager. Trained cost estimators and Affordability experts are usually found in an Affordability Group, Cost Estimating Group, Finance, Systems Engineering, or Support Engineering. No matter where they reside, their services and expertise must be pulled into and used in a program’s Affordability effort. When an expert is not available, someone on the program should be trained to take over the cost estimating and Affordability expert duties as their primary duty. Affordability and cost estimating must be important to the program!
An Affordability Manager that is resident on a program and part of the Management Team and Design IPTs is a must for Affordability success. The Affordability Manager should be tasked with making sure that:
Figure 3. Affordability Iterative Process
In addition to being able to implement Affordability Methodology and use the cost estimating tools, the Affordability Manager should be familiar with the following processes and tools used for analysis by the Design IPTs:
In summary, the fourth pillar of Affordability, Tools/Automation, is absolutely necessary to the success of a program’s Affordability effort. This pillar requires that the proper tools are used by the proper people at the right time in a programs life cycle to estimate cost; an essential element of cost reduction. A program should have an Affordability Manager assigned whose sole duty is cost estimation and Affordability Methodology application on the program. Lastly, the Affordability Manager should be well versed in the processes and tools that will enable him or her to contribute to the work of each Design IPT.