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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
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Content

Introduction and Overview


Estimating Methodology
Tools and Databases

Component Costing

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Introduction and Overview

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Introduction and Overview

Ford JLR
UK UK
Germany Aston Martin
Spain UK
North America Volvo
Mexico Sweden
Australia
South Africa
India
Cost as a Business Driver ACostE EMC Learning Event
Terry Griggs Ford Motor Company
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Introduction and Overview

Finance
Manufacturing Engineering Purchasing
PD-Finance

TVM-Finance

Cost
Estimating

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Introduction and Overview

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.

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Introduction and Overview

Roles and Responsibilities

Strategy Costing Establish Gap to Benchmark


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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Estimating Methodologies

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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Estimating Methodologies

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.

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Estimating Methodologies

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
Cost as a Business Driver ACostE EMC Learning Event
Terry Griggs Ford Motor Company
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Tools and Databases

Systems & Data Bases

CAPE (Computer Aided Parts Estimating)


GRIMM (Global Rate Information - Material &
Machines)

and ...

Experience

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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.

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Tools and Databases

CAPE Expert Modules


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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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
Cost as a Business Driver ACostE EMC Learning Event
Terry Griggs Ford Motor Company
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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.

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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
Cost as a Business Driver ACostE EMC Learning Event
Terry Griggs Ford Motor Company
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Introduction and Overview


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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Component Costing

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Component Costing

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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
Cost as a Business Driver ACostE EMC Learning Event
Terry Griggs Ford Motor Company
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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)

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Component Costing

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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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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-

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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.
Cost as a Business Driver ACostE EMC Learning Event
Terry Griggs Ford Motor Company
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Component Costing

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Component Costing

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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Component Costing

Application of Mark-Ups

Scrap
SG&A
Profit
ED&T

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
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

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
32

Content

Introduction and Overview


Estimating Methodology
Tools and Databases

Component Costing

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company
33

Questions

Questions ?

Cost as a Business Driver ACostE EMC Learning Event


Terry Griggs Ford Motor Company