Concurrent Engineering
PART I.
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The international competition created by recent advances in manufacturing systems has made companies change their product costing methods. Among them, concurrent engineering is appropriately used as a manufacturing strategy. It is the simultaneous design of product and the process required to produce and support it. In this paper, product costing for the concurrent engineering environment will be explained. When it is implemented, it can help cost management systems to compare profit margins of different product lines with related resources actually utilized. Introduction Increased foreign competition has propelled companies around the world to place an emphasis on manufacturing and technology management. CAD/CAM, CAE, and CIM concepts promise lower cost, higher quality, and shorter times for product development. However, plans should not be made naively, because there are limits to what can be realistically expected. Some technology leaders in electronics, automotive and other manufacturing industries have reached a limit on the amount of productivity that they can gain from the use of CAD/CAM and CAE systems. The next important stage of computerization for them is to procure methodologies that capture design and manufacturing knowledge as well as support reliability, performance, and cost trade-offs during conceptual design. This methodology is called concurrent engineering. Traditional Product Life Cycle The traditional engineering life cycle, as illustrated in Figure 1 (from Reference 1), is a serial process in which the design is passed through the various separate but related tasks. Marketing people gives their needs to the designers, who determine product specifications, and, in turn, send their product design to manufacturing people, who specify the production system to make the design. Then, the production system is designed and a product cost is calculated. Traditional Cost Estimating Systems Most current cost estimating systems collect labor cost, material cost, and overhead cost for the purpose of financial reporting. Input data to the cost estimating systems are route sheets, cost data for materials, labor, and overhead. To determine product cost, overhead expenses are allocated to products upon simplified method such as direct labor or machine hours basis. Most of the simplified method of overhead cost allocation found in the cost estimating systems result in equally misleading product costs [2]. Products that do not actually utilize some of the incurred overhead expenses are absorbing the costs. Conversely, those products that are produced with overhead expenses are not absorbing the true costs of their manufacture. Profit margins are distorted. Therefore, the product costing found in the traditional cost estimating systems may give misleading answers about total product profitability. Concurrent engineering addresses all product aspects including cost determination during the design stage. It promotes the separate tasks of the product development process to be carried out simultaneously rather sequentially. Assembly people consider assembly problems, process planning people consider the process sequence, and marketing department consider the product functionality and selling price, and so on. Therefore, the multidisciplinary team has the mission to conceptualize the product and optimize it until a consensus agreement is reached on the functionality, producibility, and selling price. Figure 3 shows the stages that a product goes through during the design process. The product design and system design and product cost estimation are all worked out together. Cost Estimating Systems in Concurrent Engineering For a new product in traditional engineering life cycle, usually it requires several iterations before the design is accepted as satisfactory. Modification may be made in the product design or in the process design. Changes made in the product design and process design result in an expensive task. It has been shown that 70% of the production cost of a product is determined during the development of product concept.[4] Only about 20% of the production cost is affected by changes in later stages such as manufacturing planning. This means that the conceptual design stage is far the most profitable to address in order to reduce costs. In concurrent engineering environment, product design processes and manufacturing processes are performed simultaneously, therefore the route sheets are available before the installation of the manufacturing system. At this time it is possible to estimate product cost using the databases and the necessary software interfaces. Concurrent engineering's requirements from a cost estimating system, therefore, can be summarized by the questions as: • What should it cost to make and sell each individual product? • What does it cost to make and sell each individual product? Providing the answers to these questions is mainly the responsibility of cost estimating system design. The design should consist planning of direct labor and material costs, overhead expenses, and bill of material for accumulation of planned expenses. As the manufacturing system is installed, the associated section of the cost estimating system can be developed. For example, establishment of the product definition and process database provides a basis for establishing direct labor and direct material costs. To be Continued STAY CONNECTED To stay current on bullet-proofed manufacturing solutions, subscribe to our free ezine, "The Business Basics and Best Practices Bulletin." Simply fill in the below form and click on the subscribe button. 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