Cost – Performance Trade Studies During Product Development

Take Corrective Action To Improve The Development Process The Solution:
– Weave Best Practices of cost management into the development process – Implement Critical Parameter Management (CPM) techniques – Merge cost management with CPM throughout development – Share cost and performance information in a near real time environment

Merging cost and performance information with near real time feedback results in improved performance, reduced (or at least better understood cost), better adherence to schedule, fewer failures, and reduced total ownership cost.

© 2008 Cognition Corporation and David M Cronin

1 of 33

Cost – Performance Trade Studies During Product Development

What We Want To See During Development
Example Of Using CAIV* & CPM** On A Program To Improve Affordability
35
Planned Cost Reduction Actual Cost Reduction Project Cost Goal Project Cost Stretch Goal

30

Cost
25

GNG Make / Start Buy Design

Critical Design Review (Gate)

20

System Development Time
© 2008 Cognition Corporation and David M Cronin

*CAIV = Cost As Independent Variable **CPM=Critical Parameter Management 2 of 33

Cost – Performance Trade Studies During Product Development

We Need To Impact Cost During Early Program Phases
70

60

50

40

%
30 20

10

0 TOC Spent $ Impact on O&S Costs

Concept 3 70

Full Dev 12 15

Production 20 10

O& S 65 5

The Majority of the Customer’s Cost is in the “O&S Phase” but that cost is mainly defined in the “Concept Phase”.
© 2008 Cognition Corporation and David M Cronin

3 of 33

Cost – Performance Trade Studies During Product Development

Start By Weaving Cost Management Into The Product Development Process

© 2008 Cognition Corporation and David M Cronin

4 of 33

Cost – Performance Trade Studies During Product Development

Implement Best Practices Of Cost Management

$

Manage WBS Structure With Multiple Configurations “On The Fly”

₪ Estimate Costs With Multiple Methods And Fidelities


£
¥

Manage Multiple Cost Estimates Over Time For Each Element Roll Up Multiple Cost-Configuration Scenarios Flag And Trace Cost Drivers With Detailed Reports Define Cost Estimating Relationships At All System Levels Identify, Implement, And Track Cost Reduction Initiatives

¢

© 2008 Cognition Corporation and David M Cronin

5 of 33

Cost – Performance Trade Studies During Product Development

First Create and Manage The WBS/BOM
Import WBS/BOM From Various Sources (Spreadsheet, Corporate Database, PLM), Or Create Structures On The Fly
Import and manipulate existing structures

Trace History Of Configuration Changes With Variants

© 2008 Cognition Corporation and David M Cronin

6 of 33

Cost – Performance Trade Studies During Product Development

There Are Many Methods For Successful Cost Modeling In A Near Real Time Environment
€ AdHoc € Rough Order of Magnitude (ROM) € Cost by Analogy, with complexity (“similar to”) € Individual spreadsheets € Parametric - based on industry standards (“out of the box”) € Parametric - with product line calibration Data € Historical € Engineering Buildup-Actuals € Cost Factors and Rates € Supplier Quotes: Materials € COTS detailed and budget estimating tools
© 2008 Cognition Corporation and David M Cronin

7 of 33

Cost – Performance Trade Studies During Product Development

Over Time We Will Reduce The Cost Model Uncertainty
Estimated Cost Actual cost of New Technology

Cost Uncertainty

Uncertainty Range

Very Good Estimating Tools (Based on Some System Design)

TECHNOLOGY EVALUATION No System Design To Base Estimate

DESIGN REVIEWS

POST RELEASE Actual Costs Make up Majority of Estimates

Cost Modeling is only as good as the Technical Design Input
© 2008 Cognition Corporation and David M Cronin

8 of 33

Cost – Performance Trade Studies During Product Development

Now Attach All Cost Information To The WBS/BOM Structures
Existing Estimates, New Estimates, Or Link To Data In Legacy Systems

M A N U F A C T U R I N G

Process Times

Raw Material Data

Cost Centre Rates

P U R C H A S I N G

Suppliers Cost, Qty Associated Cost Effectivity Sub Con, Make/Buy, etc

Foreign Overhead Factor
9 of 33

F I N A N C I A L

Rates Burdens Exchange Rates

© 2008 Cognition Corporation and David M Cronin

Cost – Performance Trade Studies During Product Development

Then Create And Manage Cost Reduction Initiatives

Initiatives Are Important: They Help Us Keep Track Of Potential Cost Drivers And Our Specific Future Actions To Effect The System Cost
© 2008 Cognition Corporation and David M Cronin

10 of 33

Cost – Performance Trade Studies During Product Development

It Is Critical That Cost Management Results Output To Engineers As Well As To Cost Professionals
Navigate And Search By Configuration, Estimate, Initiative, Cost Drivers

Multiple Outputs For Different Users Of Cost Data
© 2008 Cognition Corporation and David M Cronin

11 of 33

Cost – Performance Trade Studies During Product Development

We Then Create Cost Management Trade Scenarios
B e lu g a C o c k p it W in g ( P ) W in g ( S ) F u s e la g e L a n d in g G e a r

“Make v Buy”
B e lu g a
C o c k p it

“What If”
W

C o c k p it

W in g ( P )

W in g ( S )

F u s e la g e

L a n d in g G e a r

B e lu g a ( P ) W in g ( S ) F u s e la g e L a n d in g G e a r

in g

Target
B e lu g a C o c k p it W in g (P ) W in g (S ) F u s e la g e L a n d in g G e a r

I Would Love To Have Performance Related Input To Help Drive These Scenarios !
© 2008 Cognition Corporation and David M Cronin

12 of 33

Cost – Performance Trade Studies During Product Development

Now, Implement Critical Parameter Management Early In The Development Process

© 2008 Cognition Corporation and David M Cronin

13 of 33

Cost – Performance Trade Studies During Product Development

What Is Critical Parameter Management (CPM)?
CPM Is A Disciplined Methodology Used To Capture System Performance In A Structured Repository

Marketing

MFG

Systems Engineering

Critical Parameter Management (CPM)

Suppliers

Subject Matter Experts Design
© 2008 Cognition Corporation and David M Cronin

Partners Standards
14 of 33

Cost – Performance Trade Studies During Product Development Snapshot Process Flow Of Critical Parameter Management

Voice of the  Customer Needs System Level  Requirements System Level  CTQs….. Subsystem Level  CTQs….. Subassembly  CTQs..… Component CTF  Specs….

Cp/Cpk

f(x)

Cp/Cpk

f(x)

Flo w

Up of N

Component ‘Critical  to Function’ (CTF)  Requirements

om i
15 of 33

Subassembly  Level  Requirements 

© 2008 Cognition Corporation and David M Cronin

na l

Cp/Cpk

f(x)

&C ap ab ilit

w Flo Do wn

Subsystem Level  Requirements

Cp/Cpk

y

ire qu Re of nts me

Cost – Performance Trade Studies During Product Development

Critical Parameter Relationships
The System Functional Paths Determine The Critical Parameter Architecture
The Critical Parameter Architecture Crosses ALL Boundaries Of The Physical Architecture (WBS)
This Is The Primary Difference Between Systems Requirements Management And Critical Parameter Management

© 2008 Cognition Corporation and David M Cronin

16 of 33

Cost – Performance Trade Studies During Product Development

Establish The Critical Performance Parameters
Create System Performance Hierarchy & Relationships
Flow Down Critical Parameter Tree
There Are Many Ways To Create This Tree Including QFD, Direct Flowdown, And Functional Path

Radar Project

© 2008 Cognition Corporation and David M Cronin

17 of 33

Cost – Performance Trade Studies During Product Development

Transfer Functions Enable Feedback Throughout The System
σ Transfer Functions are Required for Predictive Engineering
 Calculates nominal output value given a set of inputs y = f(x1, x2, … xn)  Calculates variations of the output value & input sensitivities σ y = sqrt(s1*σ 12+s2*σ 22 …. +sn*σ n2)

σ Popular Methods for Developing Transfer Functions
 Explicit Engineering Equations  Experiments; DOE & Monte Carlo (Virtual & Physical)  Testing: Regression Analysis (Physical Only)  “Black Box” Application Software Tools  Company “Tribal Knowledge”
© 2008 Cognition Corporation and David M Cronin

18 of 33

Cost – Performance Trade Studies During Product Development

Transfer Functions Make The CPM Tree “Come Alive”

CTQ Design Intent “Flow Up” based on Design Spec’s of Inputs (X’s)
Performance

s De n ig In nt te
Producibility

Post Analysis Sigma Shift

CTQ Process Capability “Flow Up” based on Estimated/Actual Process Capability (Short & Long Term)

s es oc Pr pa Ca

lit bi y

Static Shift
© 2008 Cognition Corporation and David M Cronin

Dynamic Drift
19 of 33

Cost – Performance Trade Studies During Product Development

We Can Now Predict System Performance
Roll Up The Tree With Sensitivities For Each Critical Performance Parameter While Tracking Sensitivity For Each Parameter And Notify The Affected Owners Of the System
Radar Project

Va

Producibility

ria ti

on s

Performance

f(x)

f(x)

f(x)

f(x)

om

ina l&

Flo

wU pN

f(x)

f(x)

f(x)

f(x)

© 2008 Cognition Corporation and David M Cronin

20 of 33

Cost – Performance Trade Studies During Product Development

Now Merge The Best Practices Of Cost Management And Critical Parameter Management For Near Real Time Feedback Of Cost And Performance

© 2008 Cognition Corporation and David M Cronin

21 of 33

Cost – Performance Trade Studies During Product Development

The Goal Is To Have A Trade Space For Cost And Performance

Cost Management

Critical Parameter Management

A New System Design Trade Space
Use Best Practices From Each Discipline To Optimize System Cost And Performance

AT THE SAME TIME

© 2008 Cognition Corporation and David M Cronin

22 of 33

Cost – Performance Trade Studies During Product Development

WBS/BOM Trees (Cost) And CPM Trees (Performance) Can Now Work Together
Form Fit Function

Bill of Material Hierarchy

Critical Parameter Hierarchy

Defines:
 Physical/Geometric Relationships  Material Specifications  Manufacturing Procedures

WBS…..
Defines Fit Configuration

Defines:
 Functional Parameter Relationships  System Performance Capabilities  Direction/Focus for Engineering

Does NOT Define:
 Functional Characteristics  Performance Capabilities
© 2008 Cognition Corporation and David M Cronin

CPM Tree…
Analyzes Fit Capability

Does NOT Define:
 Assembly Characteristics  System “Packaging”
23 of 33

Cost – Performance Trade Studies During Product Development

WBS/BOM Elements Are Bi-Directionally Associated With Critical Performance Parameters

We Can Also See What Particular Performance Parameters Are Driving My Cost As A Part Number We Can See What Specific Part Numbers Are Associated With My Critical Performance Parameters

© 2008 Cognition Corporation and David M Cronin

24 of 33

Cost – Performance Trade Studies During Product Development

Cost Roll Ups Become Transfer Functions In The Performance (CPM) Structure

If Any Aspect Of A WBS/BOM Part Changes, Flag The Effected Performance Parameter(s) And Notify Appropriate Users Of The Change

© 2008 Cognition Corporation and David M Cronin

25 of 33

Cost – Performance Trade Studies During Product Development

Performance Parameter Interactions Trigger Cost Studies

If Any Aspect Of A Performance Parameter Changes, Flag The Associated WBS/BOM Part And Notify Appropriate Users Of The Change

© 2008 Cognition Corporation and David M Cronin

26 of 33

Cost – Performance Trade Studies During Product Development

Trace History Of Performance Changes And Their Cost Impact On Each Part Number

Wow, I Was Just Informed That A Performance Specification Changed; Better Check This Part Number’s Current Estimate And Update If Necessary

Of Course, If I Have Defined A Transfer Function For Cost, The System Will Update The Cost For Me Automatically And Keep A History Of The Changes

© 2008 Cognition Corporation and David M Cronin

27 of 33

Cost – Performance Trade Studies During Product Development

Design Trade Space For Balancing Cost And Performance
We can now do real trades with rapid feedback
Unaffordable

Target: “Best Value”

The Knee Performance (y)

Performance Objective

Cost / Performance / Schedule Trade Space

Performance Threshold Cost Cost Threshold

Unacceptable Performance

dy/dx

Cost

Objective

Cost (x)
© 2008 Cognition Corporation and David M Cronin

28 of 33

Cost – Performance Trade Studies During Product Development

An Ideal Cost And Performance Optimization Cycle
Metrics: Unit Cost, Score Card, CRI Status, Watch List, Mitigation Plan

Identity Risk & Opportunity
Performance Model
Critical Parameter Management

Prioritize
Risk & Opportunity

Optimize
Design For Six Sigma
System Performance System Cost

Customer Requirements & Concerns

Affordability Model
Cost as An Independent Variable

Trade Studies
Optimize Cost vs. Performance •Assess and Prioritize
Performance (y)
Unaffordable

Business Strategy & Goals

•Develop and Implement Mitigation •Track and Report Risks

Optimal Area

Performance Objective

Cost / Performance / Schedule Trade Space
Performance Threshold Cost Objective Cost Threshold Unacceptable Performance

dy/dx

Cost

Cost (x)

Tools: QFD, CAIV, CPM, DOE R&O, FMEA, PCAT, SDM, DFMA, and MSA
© 2008 Cognition Corporation and David M Cronin

29 of 33

Cost – Performance Trade Studies During Product Development

The Call To Action
Implement An Effective Cost Management Process – We All Have Some Process For This Now: Good – Must Formalize The Data Structures For Cost Management – You Need A Flexible Open System To Manage The Cost Information – Begin Creating Cost Relationship Equations Based On Performance – Improve The Process For Sharing Cost Information Across Departments Implement Critical Parameter Management (CPM) – Start In Small Steps: One Part Of One Program At A Time – Weave CPM Into Your Development Process – Just In Time Training To Engineers – Start CPM As A Separate “Silo” From Cost Management – As You Progress With CPM, Add The Cost Connections – You Need a Flexible Open System To Manage CPM Information – Feedback The CPM Information To The Cost Management System

Combine The Two Processes After You Have Experience With Each
© 2008 Cognition Corporation and David M Cronin

30 of 33

Cost – Performance Trade Studies During Product Development

How Can You Get Started Doing This?
– Many Companies In Multiple Industries Are Active In This Effort – There Is Not Currently One Venue For Bringing Together Both Processes – Attend Conferences: Cost Management And Critical Parameter Management – Create An Informal Multi-Industry Consortium To Share Best Practices – I Can Put You In Touch With People Doing This Work – I Can Visit You And Provide An Assessment Of Your Processes – I Can Provide You With Lists Of Appropriate Conferences, Papers, And Suppliers Who Can Help You With This Process Improvement Work
© 2008 Cognition Corporation and David M Cronin

31 of 33

Sign up to vote on this title
UsefulNot useful