Automotive - Comparative Study

1
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
2
Content
Introduction and Overview

Estimating Methodology
Tools and Databases
Component Costing

3

4
Ford JLR
UK UK
Germany Aston Martin
Spain UK
North America Volvo
Mexico Sweden
Australia
South Africa
India
5
Finance
Manufacturing Engineering Purchasing
PD-Finance
TVM-Finance
Cost
Estimating

6
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.

7
Roles and Responsibilities
Strategy Costing Establish Gap to Benchmark

Target Setting and Supplier Negotiations
Agreements
Competitive Teardown
Change Control Analysis
Launch Team Cost Requests

8
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

9
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

10
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.

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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
12
Tools and Databases
Systems & Data Bases
CAPE (Computer Aided Parts Estimating)

GRIMM (Global Rate Information - Material &
Machines)
and ...
Experience

13
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.

14
Tools and Databases
CAPE Expert Modules

Metal Stamping
Plastic Injection Moulding
Rubber Moulding
Pressure Die Casting
Tube Manipulation
Welding
Assembly
Wiring
Clean Sheet

15
Tools and Databases
CAPE Assumptions
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
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.

17
Tools and Databases
GRIMM Database
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

18
Tools and Databases
GRIMM Database
Britain Czech Republic
Germany Poland
Spain Hungary
France Turkey
Portugal Slovakia
Italy Slovenia
Romania
North America
Mexico India Korea
Maquiladoras Sweden South Africa
China Australia
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Utilities
Direct Labour
Labour Plant Supervision,
Plant Eng
Indirect Labour
Quality Control,
Health Dept,
Fringe Security, Canteen etc.
Standard Parts Holidays, Sickness,

Estimated End Item Manuf. Bonuses
Material
Piece Price Scrap Cost
Raw Material
SG&A Depreciation
Interest
Profit Clean & Special
Floorspace Handling
ED&T Burden Machine

Machine Maintenance
Overheads
Indirect
Materials Tool Maintenance
Insurance
Utilities

20
Component Costing
1. How an Estimator
Creates Manufacturing 2. GRIMM Applies Cost 3. Calculate Manuf.
Detail to Manuf. Detail Cost Subtotals:
+ Raw Materials
Raw Materials: Usage ABS Resin: $1.90/Kg
+ Purchased Parts
Purchased Parts: Usage Fastener: $.03/ea
+ Labor & Burden
Operation 1: Mold 500 Ton Inj. Molding Press: $0.89/min.
Labor minutes (number of
Direct Labor $0.17 Depreciation: $0.15
direct laborers, cavities, &
cycle time) Indirect Labor 0.13 Utilities: 0.04
Machine minutes (cavities & Fringe 0.15 Floor Space: 0.03
cycle time)
MRO Labor 0.08 Other Burden: 0.14 4. Apply Markups
Total Labor $0.53 Total Burden: $0.36 to Manuf. Cost:
Operation 2: Assembly Assembly: $0.42/min. + Purch. Parts
Labor minutes (number of Direct Labor $0.00 Depreciation: $0.08 + Scrap
direct laborers, cavities, & Total
Indirect Labor 0.13 Utilities: 0.01
cycle time) + SG&A = Estimate
Machine minutes (cavities & Fringe 0.06 Floor Space: 0.01
cycle time)
+ Profit
MRO Labor 0.04 Other Burden: 0.09
Total Labor $0.23 Total Burden: $0.19

21
Component Costing

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Component Costing

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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
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Component Costing
1 2
Terminal & Wiring
Connector Machine Loom Data Wiring Loom
Yearly Update
Price (Supplier/ Data
Data
Ford) (Supplier)
Benchmarking
Continuous Update Data (e.g.
Materials, Clips,
Tape, Tube, etc) GRIMM EDGS/C3P Wiring
Loom Data
3 Non Standard Parts
Overnight Update Update 1-3 days
CAPE Wiring Estimating Manual

Data Estimating
Modification
Final Wiring
Estimate
(local
condition)

25
Component Costing
Global Rates
Machines and
Materials Database
Includes all machine,
materials and
standard
components (i.e.
Connectors,
Terminals) including
cost information

26
Component Costing
AA 3M5T-14K733-JF M ##
CC 1 A/RSM3G-4603A- TapeTape (9mmx25m)
CC 2 A/RSKM3-G9513-A TapePaper tape
EDGS / C3P Data CC
CC
3 A/RSKM3-G9513-A
4 A/RS95G-G14K02-4AA
TapePaper tape
TapeTape
imported CC
CC
5 A/RSM3G-4616A-
6613598AG-14A199-AA
TapeTape
TubeID5 Conv tube 130C
CC 7238098AG-14A199-GA TubeID12.9 Conv tube 130C
CC 14 69098AG-14A199-EA TubeID10.1 Conv tube 130C
CC 15 92098AG-14A199-KA TubeID16.8 Conv tube 130C
All components and CC 16 105* RE-SIN R-IBBON Other80X45 RIBBON/OUT
CC 17 13M5T-14A076-AB OtherUpper Cover
materials are captured in CC 18 13M5T-14A142-AB OtherLower Cover
CC 19 13M5T-14A076-BB OtherCover Midi Fuses
the import file for CC
CC
20 13M5T-14A034-AB
21 33M5T-14474-GAA
OtherABS Fuseholder
TerminalTerminal f 2.8
downloading to CAPE CC
CC
22 143M5T-14474-GBA
134 13M5T-14489-TAA
Terminal2.8 cbt 0.75-1.00 SN
ConnectorCF 1Pos NWP LSK 8.0
CC 183 101L3T-14A094-FA OtherFuse Mini 10A RD
CC 184 21L3T-14A094-GA OtherFuse Mini 15A BU
CC 185 13M5T-14A067-BB ConnectorBJB Frame (high assem
DD 4-EC2GY-RD 0,5 WK 1345 -- --
DD 4-PB9GY-VT 0,5 WK 2180 -- --
DD 15S-RD15DGN-OG 2,5 WK 960 -- --
DD 49S-LG11ABU-OG 0,75 WK 1520 -- --
DD 49S-LG18ABU 0,75 WK 480 -- --
DD 50-BB16_AGY-BK 1,5 WK 2130 -- --
EE CRCR DATE 03/01/24 EE00-E-1 1449615 -000-

27
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.
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Component Costing

29
Component Costing

30
Component Costing
Application of Mark-Ups
Scrap
SG&A
Profit
ED&T

31
Component Costing
Focus C-Max Cost Breakdown

Material Cost: 232.52
Labor Cost: 53.55

Machine Cost: 20.35
Scrap: 3.85
SG&A: 35.96
Profit: 25.93
R&D: 12.95
Total Estimate 385.11
Labor Minutes: 594.39 min

32
Content

Estimating Methodology
Tools and Databases
Component Costing

33
Questions
Questions ?


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1

Cost as a Business Driver

Cost Estimating Comparative Study

Terry Griggs and Bill Ewin

Cost as a Business Driver ACostE EMC Learning Event

Introduction and Overview

Cost as a Business Driver ACostE EMC Learning Event

Introduction and Overview

Cost as a Business Driver ACostE EMC Learning Event

Introduction and Overview

Introduction and Overview

Cost as a Business Driver ACostE EMC Learning Event

Introduction and Overview

Roles and Responsibilities

The Cost Estimator develops estimates of piece cost

Cost as a Business Driver ACostE EMC Learning Event

Introduction and Overview

Roles and Responsibilities

Strategy Costing Establish Gap to Benchmark

Cost as a Business Driver ACostE EMC Learning Event

Activity Based Costing

Each process step is defined in terms of the

Cost as a Business Driver ACostE EMC Learning Event

Activity Based Costing

There are two major elements contained within

Cost as a Business Driver ACostE EMC Learning Event

Zero-Based Estimates (ZBE)

ZBE is a Target cost for the supplier to

Cost as a Business Driver ACostE EMC Learning Event

Zero-Based Estimates (ZBE)

Tools and Databases

Systems & Data Bases

CAPE (Computer Aided Parts Estimating)

Cost as a Business Driver ACostE EMC Learning Event

Tools and Databases

Computer Aided Parts Estimating (CAPE) is an

Cost as a Business Driver ACostE EMC Learning Event

Tools and Databases

CAPE Expert Modules

Cost as a Business Driver ACostE EMC Learning Event

Tools and Databases

Tools and Databases

Global Rates Information Machines and Materials

Cost as a Business Driver ACostE EMC Learning Event

Tools and Databases

for all supported countries

Cost as a Business Driver ACostE EMC Learning Event

Tools and Databases

Introduction and Overview

Standard Parts Holidays, Sickness,

ED&T Burden Machine

Cost as a Business Driver ACostE EMC Learning Event

Cost as a Business Driver ACostE EMC Learning Event

Cost as a Business Driver ACostE EMC Learning Event

Cost as a Business Driver ACostE EMC Learning Event

3 Non Standard Parts

Overnight Update Update 1-3 days

CAPE Wiring Estimating Manual

Cost as a Business Driver ACostE EMC Learning Event

Cost as a Business Driver ACostE EMC Learning Event

Cost as a Business Driver ACostE EMC Learning Event

Upload of Cape Estimate

Manual Update of:

Cost as a Business Driver ACostE EMC Learning Event