Cost Estimation and Quoting
Prof. Jacqueline Isaacs
P/M has emerged as leading near net shape technology because of its efficient use of materials, precise tolerances and suitability for high volume production. The key to P/M's survival depends on how aggressively it can reduce its cost. To achieve cost reductions, the P/M parts producers need to have a clear understanding of their cost burdens. Once they can accurately identify the major costs, they can concentrate their cost reduction efforts in those areas.
Construction of a technical cost model (TCM) allowed economic aspects of each specific step to be tracked and analyzed. Major cost drivers, once identified, can be examined more closely and targeted for cost reduction. PowderEx was the cost model developed to estimate the cost of die-compacted ferrous P/M parts. It is made robust enough to handle process variants, like double press/ double sinter (DP/DS) and warm compaction. These processes are becoming extensively used as industry strives to achieve higher strengths and densities for components. The PowderEx model was used to make economic comparisons regarding two P/M process variants, DP/DS and warm compaction, for two specific P/M parts.
Technical Cost Modeling (TCM) is an extension of conventional process modeling, with particular emphasis on capturing the cost implications of process variables and economic parameters. TCM tracks the overall cost by individual cost elements, using engineering principles and physics of the process in question. Unlike different costing systems prevalent in the industry where the manufacturing overhead is allocated on the basis of direct labor or machine rent, TCM breaks down the manufacturing overhead into individual process steps and evaluates the materials, energy, labor and overhead requirements for each step, thus giving a clearer picture of the cost burdens.
The PowderEx model was developed to estimate the part costs for conventional ferrous P/M. Built using Microsoft Excel, the spreadsheet-based model was made robust enough to handle process variants, such as 1) single press/ sinter /repress, 2) double press/ double sinter and 3) warm compaction. To handle the complexities, macros were built into the spreadsheet using Visual Basic programming. By building the model in Excel, a user does not need any programming background to use it and the user interface offered by Excel is visually appealing. The development of model began with several simultaneous undertakings. A firm understanding of the P/M process and all its variants were essential. Industry data, processing information, costs of various machines, etc. were gathered. Field trips to P/M part producer facilities were undertaken, so that the model accurately reflects the actual processing conditions. The interface was kept simple and attractive, to make it user friendly. Dialog boxes, drop-down menus, and command buttons were created, so that the complexity can be built into the model, without bringing discomfort to the user.
The model has a simple construction; it has nine worksheets, three of which are the drivers for generating part costs. These include: an "Inputs" worksheet for the user to enter the inputs; a "Model" worksheet where all the computation is done by the model, and an "Output" worksheet where the outputs are displayed.
The "Model" worksheet is dynamic in nature, i.e., any changes made in the "Inputs" worksheet are reflected in the "Model" worksheet and are passed onto the "Output" worksheet. Within the "Output" worksheet, sensitivity charts show the variation in part cost as various input parameters are changed. Pie charts show the breakdown of processes or parameters that contribute to the final cost, and indicate opportunities for cost reduction. These charts help the user i) understand different costs, ii) grasp their effect on the final cost per piece, iii) discern the critical inputs to the process, and iv) identify the major cost burdens.
A User Manual was developed, where PowderEx TCM is described in greater detail. Each worksheet in the model is explained, with all input parameters and outputs described. The User Manual also includes a step-by-step tutorial of a P/M case study for new users.
Validation is a process requiring the model builder to communicate a basis for confidence in a model to a target audience. The model's usefulness cannot be realized unless there is confidence in the model output. After completing the construction of the model, it was necessary to establish confidence in the accuracy of the model before beginning any in-depth analysis. Of course, the best way to verify the performance of any model or simulation is to compare its output with industry data.
Three different components and their process and cost information obtained from several fabricators. Cost model results for these cases are compared with the provided part costs. The results of the validation are very encouraging. The PowderEx TCM demonstrates fairly accurate estimations of the part costs. Results from these comparisons are summarized in terms of percent deviations from an undisclosed cost baseline.
- There is a difference of 10% in the sun gear part cost generated by PowderEx compared with the cost provided by the part manufacturer.
- For a planetary gear, the PowderEx model estimate shows a 14% difference, compared with the provided cost information.
- A small spur gear was also investigated and its estimated part cost shows a 6% difference, compared with fabricator information.
The cost estimate generated by the model is higher than the part cost provided by the producer for all three components. The results were analyzed and following possible reasons for this deviation are cited:
- There is a possibility that the manufacturers are not aware of their actual manufacturing costs and hence did not report accurate information for verification.
- The part cost provided by the parts producer includes a large overhead rate, and the accuracy of that number itself is questionable.
- The input parameters that are used in the model can still be fine-tuned. While great efforts are taken to ensure the inputs are as close as possible to the manufacturing conditions, the model does not capture all nuances of the process.
After model validation, case studies were undertaken to use the model for its real purpose: part cost estimations and competitive analysis.
The User Manual for the PowderEx Model is included in the Appendix:
- P/M Part Processing Technical Cost Model User Manual, Version 1.0, J. A. Isaacs, J. L. Maziarz and M. Shah, Northeastern University, MIME Department, November 2000. Developed with Funding from the Powder Metallurgy Research Consortium at Worcester Polytechnic Institute and from the National Science Foundation Grant Number DMII-9734054.
Last modified: October 23, 2007 08:48:39