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This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies.

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