Post on 30-Mar-2015
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Cost as a Business Driver
Cost Estimating Comparative Study The Aerospace Angle
Mick Rushe Rolls-Royce
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Background
• Part of Value Improvement
• Teams base in Derby,Bristol, Germany & USA
• Detailed estimating to give Should Costs
• Main software is CAPPe from T-Systems
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PURCHASING PLANS
Parametrics
ShouldCosting
LTA
Negotiation
CVP
Supplier Cost Modelling
SupplierDevelopment
Pri
ce
Ag
reem
ent
Commodity Strategy DevelopmentPrice Negotiation
Value Improvement Strategy Flow
Continuous ImprovementCost Improvement
Contract ReviewBoard
ECR
CVP = Customer Value Process
ECR = Engineering Cost Reduction
Supplier Development not part of VI
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Customers• Commodity buyers
• Operation buyers
• Risk and Revenue Sharing Partners
• Project Executive
• Advance Propulsion Systems Design
• Engineering
• Cost excellence
• Aero Repair and Overhaul
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Component
• Electrical harness for Gas Turbine Engine
• Customer Requirement
• Current cost model is excel based
• Developing model in CAPPe
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Process
Three main elements to cost model
• Bought out finished (BOF) materials
• Time generation
• Charge out rates and margins using RateMarker
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BOF MaterialsThese include:-
• Connectors • Backshells• Cable• Boots etc
• Approx 70% of Harness cost
• Using Sub-tier quotes
• Next steps engage with sub-tier
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Time Generation
Points considered:-• Standards
• Visited all suppliers
• Design implications
• Supplier Quality
Which established• Method of Manufacture
populated with times
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Charge out rates and margins using Ratemarker
Cost of Money - Purchased Parts and Manufacturing Op Costs
Purchase handling fee (burden) Profit Margin Cost Rate Per Hour
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Estimated Recurring
Piece Price
Price Modelling Price Modelling MapMap
Purchased Parts,
Consumables and Material
Cost
Process Costs
Logistics Costpaid by Supplier
Margin/Profit
Manuf. Cost
Batch Lead-Time cost-of-money
Tooling Costs & other NRC
* SEE FURTHER SLIDES FOR BREAK-DOWN
•External spend•Purchase Burden (if not in Indirect Costs)•Cost of Money (due to stock burn-off)•Process Related Scrap impact on lost purchases.
Work-Center
Specific cost rates *
Process Operation Times
(Cycle Run Timesand Set-Up)
Operation Scrap cost
Operation Finance Costs (cost of money)
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Work-Centre specific Cost
Rate
Cost Rate MapCost Rate Map
Direct Labour
Cost Rate
Indirect Cost Rate
Indirect – Shop Labour
Indirect – Office Labour
Indirect – Buildings & Other costs
Recovering Fixed & Variable costs
Rates applied to Set-Up or Run Operations
Work Station (i.e.Equipment)
cost rate
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Cost Rate Map - Cost Rate Map - elementselements
Basic Pay (per hour) – work-centre
skill level specific.
Fringe costs (Holiday, Sick Pay & Training costs - as lost time to business)
Shift premium Allowances
Co. National Insurance contributions (Gov. / State Taxes)
Pension Contributions
Operator Quantity –
normal operation
(Work-Centre specific, can be
< or > 1).
Direct Labour
Cost Rate
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Cost Rate Map - Cost Rate Map - elementselements
Indirect Cost Rate
Office Indirect Resources (rest of business) - Non specific to area or Work-Centre (e.g. S.G&A)
Shop Indirect & Tech Support resources
Shop Indirect Labour
Office Indirect Labour
Buildings – Indirect
Other Indirect
Operating Business Budgets (not Labour) including:Admin.; Marketing; Travel; Training; Insurance; Telephone & postage; Non-specific Transportation; Consultancy; etc.
Equipment Costs including:Office Equipment; I.T.; Shop Equipment Misc.; Stores Equipment (if not recovered via separate purchasing overhead).
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Cost Rate Map - Cost Rate Map - elementselements
Work Station (i.e.Equipment)
cost rate
Variable Cost Rate p.Hr
Shop-FloorCost Rate
p.Hr
Cost of Money –
shown as a rate p.Hr.
Capital Depreciation
& MaintenanceCosts p. Hr
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Should costing of sample harness to be presented at Seminar