Rapid Cost Modelling for the Small and Medium Sized Company

By Ince, Ray; Hutton, Rob et al. | Management Services, May 2001 | Go to article overview

Rapid Cost Modelling for the Small and Medium Sized Company


Ince, Ray, Hutton, Rob, Whitehead, Rob, Management Services


Commercial Work Data (CWD) is renowned for its quick, accurate and consistent application. A Predetermined Motion Time System it is widely used within the finance sector, retailing and warehousing. Used in conjunction with PADS, CWD is also used for applications in the textile industries. The following article explains how CWD, supported with PADS can also be used for measurement in electronics manufacturing.

Many small to medium sized companies have problems costing their products accurately and consistently. As new products are developed, costing revisions need to be precise. The `costing tool' used needs to be easily understood, flexible and capable of building `data blocks' of time into a complete job.

The following article explains how this has been achieved in one company - Lambda UK (an Invensys Company - Power Systems Division) and how they have developed a rapid costing modelling tool.

Lambda UK employs 200 staff producing electronic power controls for industry. They are based in Ilfracombe, North Devon.

Goal

The company requirements were to:

review existing product costs

have a method of quickly and consistently

calculating new product costs

develop a system that was easy to maintain and understand, with ease of application.

Manufacturing processes

The processes that required costing included:

metalwork shop

paint shop

automatic/semi-automatic PCB assembly machines

manual PCB assembly

testing procedures

packing

Background to the solution (see figure 1)

Subsequent to analysing the method and producing a 'CWD pattern', repetitive elements of a job require quantification. These `data blocks' can be formed into 'objects'. For example:

Pick up Resistor + Assemble Resistor ='Object' (Resistor Assembly)

Once a database of 'objects' has been created, a 'Model' environment needs to be created. This may take the form of `drag & drop' icons or maybe 'explorer' type 'tree' searches to pick up information.

Linked into a `Product Cost Summary' by product type, cost comparisons can be made against existing data. The data is very useful for method improvement analysis.

Procedure to achieve goal

Calculate a Performance factor Consider the definition of `Labour Cost' Produce CWD/PADS 'patterns' for all processes, and produce `data blocks' of time Produce a list of re-usable 'objects' with times for all processes.

Simultaneously create an explorer `drill-down' facility using icon technology. Specialist IT staff were used for this.

Run costs through the model, and check against existing labour costs.

In addition:

CWD/PADS 'patterns' are used to assist method improvements, and maintain the 'icon' data.

'Rolling out' the model in phases, aids:

Make or Buy decisions

Kaizen teams

Managers in achieving Labour Cost targets

Calculate the Performance

(See Figure 2 - Work Measurement for Modelling)

Rated Activity Sampling (RAS) over complete shifts was used to calculate:

Contingency Allowance

Process Allowance (Line Balancing)

Performance

It is easy to dismiss the `Performance Factor, however, it is vital this factorisation is included. As staff performance levels improve over time, this factor can be changed to reflect the lower unit cost

RAS was also used to:

Highlight method deficiencies

Provide a detailed % breakdown of activities

Ensure Lost Tune was within controllable levels.

Tectime Electronic Boards are ideal for RAS, however if these are not available, the information is obtainable manually. (Tectime Windows' is recommended)

Maintaining a `keep-it-simple' approach, the machine processes were measured by stopwatch/lap-timer. (A Tectime board would be ideal). …

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