Cost as a Business Driver
Cost Estimating Comparative Study
The Automotive Angle
Terry Griggs and Bill Ewin
- Ford Motor Company
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Content
•
Introduction and Overview
•
Estimating Methodology
•
Tools and Databases
•
Component Costing
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
3
Introduction and Overview
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Introduction and Overview
Ford
JLR
• UK
• UK
• Germany
Aston Martin
• Spain
• UK
• North America
Volvo
• Mexico
• Sweden
• Australia
• South Africa
• India
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Introduction and Overview
Manufacturing
Engineering
Purchasing
Finance
PD-Finance
TVM-Finance
Cost
Estimating
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Introduction and Overview
Roles and Responsibilities
The Cost Estimator develops estimates of piece cost
and tooling cost for both present and forward model
components purchased by Ford from suppliers.
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Introduction and Overview
Roles and Responsibilities
• Strategy Costing
• Establish Gap to Benchmark
• Target Setting and
Agreements
• Supplier Negotiations
• Change Control
• Competitive Teardown
Analysis
• Launch Team
• Cost Requests
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Estimating Methodologies
Activity Based Costing
•
In estimating the cost of a part the estimator defines the
individual manufacturing processes used to produce the part
Each process step is defined in terms of the
machine employed
• Each machine in the process has been studied
with respect to the amount of burden it creates
and the total burden of the product is the sum of
all the individual machine burdens
•
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
9
Estimating Methodologies
Activity Based Costing
• There are two major elements contained within
burdens:- Labour
- Assets
• Ford Cost Estimating uses a ‘Combined Labour’ cost
within an estimate. This is to recover the cost of direct
labour, indirect labour and fringe costs
• Asset costs comprise of the owned machines,
buildings and facilities required for manufacturing
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
10
Estimating Methodologies
Zero-Based Estimates (ZBE)
ZBE is a Target cost for the supplier to
achieve through the evaluation of existing
cost structures and improvements in
manufacturing operations.
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
11
Estimating Methodologies
Zero-Based Estimates (ZBE)
• Actual production location
• Best and most efficient process to manufacture the part using
optimum machine type and size
• Fully lean production facility with maximum possible utilisation,
no WIP and minimum scrap
• Ex-works conditions
• Ford defined Labour and Machine rates and Ford General
Mark-Ups
• Labour and machine rates are based on researched data and
represent average conditions
• Mark-Ups derived from global studies into automotive supplier
accounts
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
12
Tools and Databases
Systems & Data Bases
• CAPE (Computer Aided Parts Estimating)
• GRIMM (Global Rate Information - Material &
Machines)
• and ...
Experience
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Tools and Databases
CAPE
Computer Aided Parts Estimating (CAPE) is an
advanced knowledge based system designed to
evaluate best processes and optimal costs for the
manufacture of externally purchased parts worldwide.
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Tools and Databases
CAPE Expert Modules
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Metal Stamping
Plastic Injection Moulding
Rubber Moulding
Pressure Die Casting
Tube Manipulation
Welding
Assembly
Wiring
Clean Sheet
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Tools and Databases
CAPE Assumptions
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Assumes raw materials are purchased at high volumes, net of rebates
and incentives
Direct labour is graded appropriately to match the skill level required for
individual cost elements performed
Capital equipment is chosen to exactly satisfy part requirements without
exceeding them
Capital is funded directly from the supplier company profits and not from
a commercial bank loan
Cycle times use state-of-the-art technology
100% equipment up-time except for normal maintenance
Zero excess capacity
Scrap costs are not cumulative
Floor space is fully capacitised
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
16
Tools and Databases
GRIMM Database
Global Rates Information Machines and Materials
(GRIMM) the global DB2 mainframe system used to store
material prices, labour rates and burden values.
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Tools and Databases
GRIMM Database
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Direct and Indirect Labour and Fringe Benefits
Multiple Industry Types and Skill Levels
Over 1300 different machines and supporting
data
Nearly 3000 Materials
Over 7000 Standard Bought Out Parts
… for all supported countries
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
18
Tools and Databases
GRIMM Database
Britain
Germany
Spain
France
Portugal
Italy
North America
Mexico
Maquiladoras
China
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
Czech Republic
Poland
Hungary
Turkey
Slovakia
Slovenia
Romania
India
Sweden
Australia
Korea
South Africa
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Introduction and
Overview
Utilities
Direct Labour
Labour
Indirect Labour
Fringe
Standard Parts
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
Holidays, Sickness,
Bonuses
Raw Material
SG&A
ED&T
Plant Supervision,
Plant Eng
Quality Control,
Health Dept,
Security, Canteen etc.
Clean & Special
Handling
Machine Maintenance
Tool Maintenance
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Component Costing
1. How an Estimator
Creates Manufacturing
Detail
2. GRIMM Applies Cost
to Manuf. Detail
Raw Materials: Usage
ABS Resin:
$1.90/Kg
Purchased Parts: Usage
Fastener:
$.03/ea
Operation 1: Mold
•
•
Labor minutes (number of
direct laborers, cavities, &
cycle time)
Machine minutes (cavities &
cycle time)
Operation 2: Assembly
•
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3. Calculate Manuf.
Cost Subtotals:
+ Raw Materials
+ Purchased Parts
+ Labor & Burden
500 Ton Inj. Molding Press: $0.89/min.
Direct Labor
$0.17
Depreciation: $0.15
Indirect Labor
0.13
Utilities:
0.04
Fringe
0.15
Floor Space:
0.03
MRO Labor
0.08
Other Burden: 0.14
Total Labor
$0.53
Total Burden: $0.36
Assembly:
4. Apply Markups
to Manuf. Cost:
$0.42/min.
+ Purch. Parts
Depreciation: $0.08
+ Scrap
Labor minutes (number of
direct laborers, cavities, &
cycle time)
Direct Labor
Indirect Labor
0.13
Utilities:
0.01
+ SG&A =
Machine minutes (cavities &
cycle time)
Fringe
0.06
Floor Space:
0.01
MRO Labor
0.04
Other Burden: 0.09
+ Profit
Total Labor
$0.23
Total Burden: $0.19
$0.00
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
Total
Estimate
21
Component Costing
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
22
Component Costing
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
23
Component Costing
Focus C-Max
Wire Material
1,7 Km
Tape / Tube Material
329 m
Connectors
317
Terminals
1680
Seals
440
Eyelets
42
Fuses / Relays
32
Clips / Retainer
220
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
24
Component Costing
1
Yearly Update
Continuous Update
2
Terminal &
Connector
Price
Machine
Data
Benchmarking
Data (e.g.
Materials, Clips,
Tape, Tube, etc)
Wiring
Loom Data
(Supplier/
Ford)
GRIMM
EDGS/C3P Wiring
Loom Data
Non Standard Parts
3
Update 1-3 days
Overnight Update
CAPE Wiring Estimating
Data
Final Wiring
Estimate
(local
condition)
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
Wiring Loom
Data
(Supplier)
Manual
Estimating
Modification
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Component Costing
Global Rates
Machines and
Materials Database
Includes all machine,
materials and
standard
components (i.e.
Connectors,
Terminals) including
cost information
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
26
Component Costing
EDGS / C3P Data
imported
All components and
materials are captured in
the import file for
downloading to CAPE
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
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Component Costing
Upload of Cape Estimate
with Grimm and EDGS /
C3P data
Manual Update of:
- Missing components
- Circuit twisting
- Wire single seal assembly
- Splicing & Terminal
insulation
- Terminal Insertion
- Taping & Tubing
- etc.
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
28
Component Costing
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company
29
Component Costing
Cost as a Business Driver – ACostE EMC Learning Event
Terry Griggs – Ford Motor Company