Integrated Cost Estimation Based on Information Management.pdf

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University of Twente; Laboratory of Design, Production and Management

Integrated Cost Estimation Based on Information Management

Hubert Kals; Erik ten Brinke; Eric Lutters; Ton Streppel

Abstract:

For adequate Cost Engineering, information generated and affected by different engineering tasks as well as effective

communication are prerequisites. In the context of Concurrent Engineering, Cost Engineering requires an informationmanagement system. The Manufacturing Engineering Reference Model incorporates an appropriate basis for the man-

agement of cost information. All cost information is stored, based on information structures related to the Reference

Model. This enables the storage of cost information differentiated according to cost driver and aggregation level. An

important representation aspect is the ability to construct different views with the same information. For different types

of cost estimation, the role of information management and the application of the information structures are described.

An architecture for cost estimation, employing a previously developed information management method, is proposed and

the use of this architecture is explained. It appears that the employment of the cost estimation architecture and the ap-

plication of the information management method make a truly integrated cost control system possible.

Keywords:Computer Aided Engineering, Cost Estimation, Information Management, Concurrent Engineering

Introduction

Concurrent Engineering, the simultaneous execution of shared

tasks by separate departments, has emphasised the need for good

interaction and communication between diverse disciplines. The

basis for adequate communication is availability and accessibility

of information. In particular, meaningful representations of infor-

mation reflecting the current state of affairs are more desirable

than the sole exchange of data [1].

Cost Engineering must use information covering the entire product

life cycle. This information is generated and affected by different

engineering tasks like design, process planning and production

planning. Since all the information required for cost engineering isnot always available at the desired time, historic information is

also of major importance. For cost engineering in particular, but

also for the control of the entire engineering cycle the use of an

information management system is indispensable.

Recognition of the fact that information management is a key item

in the control of the engineering life cycle has lead to new percep-

tions about the structure of, and the interaction between, the engi-

neering tasks. This paper concentrates on these aspects from the

point of view of costs. The Manufacturing Engineering Reference

Model [1] is used as the basis for information management. The

principles of information management and the structuring of cost

information related to this model are explained. The role of infor-mation management and the application of the related information

structures are described for different types of cost estimation,

being variant cost estimation, generative cost estimation and hy-

brid methods of cost estimation. After considering the principles

of cost control, an architecture for cost estimation is presented.

The use of this architecture and its interaction with information

management is explained.

Because information management is put centrally in the develop-

ment of an integrated cost estimation system, it is possible to

achieve integration in the entire engineering cycle. This surpasses

partial solutions as the integration of process planning and cost

estimation [2] or the integration of cost estimation and CAD/CAMsystems [3]. The architecture for cost estimation is general appli-

cable, it is not based on e.g. one cost estimation method [4], one

production environment [4], one product type [3], one product [5]

or one production process [2].

Information management

In order to deal with the availability of meaningful representations

of information, reflecting the current state of affairs, the manu-

facturing system is represented by a reference model. A reference

model represents a system as an organisation in terms of relatively

independent, interacting components and the globally defined

tasks of these components. The Manufacturing Engineering Refer-

ence Model is depicted in fig. 1; it emphasises the equivalent

importance of products, orders and resources in the manufacturing

cycle.

Company Management is responsible for the strategic objectives

of a company. It determines the range of products and the required

processes and resources, and it controls the customer orders.

Product Engineering performs the design and development of a

product type from functional requirements up to the specification

of the final recycling or disposal. The in-time execution of orders

is the task of Order Engineering, which determines the production

sequence and the applied resources. Resource Engineering refers

to all activities concerning the specification, design, development,acquisition, preparation, use and maintenance of resources. The

production plans generated by the engineering tasks are actually

executed by Production. The kernel of the reference model is

Fig. 1: The Manufacturing Engineering Reference Model


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Information Management; it controls the accessibility, availability

and different representations of information.

In correspondence to the reference model, three information

structures are distinguished, namely the Product Information

Structure, the Resource Information Structure and the Order In-

formation Structure (fig. 2). Each structure has different types of

objects to which information is attached. For the Product Informa-

tion Structure, the objects are depicted in fig. 3. The structures can

evolve independently, while their relationship remains the same.

Because of this, the entire range of manufacturing environments

can be described. In an engineer-to-order environment, the Order

Information Structure and the Product Information Structure can

evolve simultaneously while the Resource Information Structure

can remain relatively unchanged.

The Resource Information Structure contains the abilities, occu-

pation and condition of all the resources in a company at any

given time. The Order Information Structure deals with all the

information that indicates which product element is manufactured

when and with which resources. The Product Information Struc-

ture contains all the information concerning a product type. For a

finished product, it contains for instance the description of func-

tion, materials, dimensions, tolerances, used resources, assembly

sequence, production times, costs, etc.

The information is stored using elements, relations and attributes.The elements are the objects and the relations represent interac-

tions between the objects. The attributes are the characteristics of

an object or the characteristics of a relation between objects. In

this way, a product can be described with the fundamental struc-

ture depicted in fig. 4.

An element is part of an aspect system representing a product (e.g.

functional system, physical product definition). The number of

aspect systems is limited and, within the information management

model, they are referred to as domains. An information structure

can have several domains.

Because different interpretations of a sovereign domain are possi-

ble, the concept of different views is introduced. A view furnishes

a focussed, partial representation of the information in a certain

domain of an information structure. For example, a designer and a

process planner can visualise different interpretations of the same

geometry with the help of a view. The design view shows e.g. the

design features while the process planning view shows manufac-

turing features. The features are based on the same geometrical

elements, but their arrangement is subjective (fig. 3). To be able to

focus on a part of all information, filters are used to show only

those elements and relations that are relevant to the user.

The use of elements and relations as described previously is very

suitable for Object Oriented Programming. The elements and

relations have characteristics as shown in fig. 5. Every element

and relation must have a unique ID. For every element and rela-

tion, the type has to be specified and the views and domains they

belong to have also to be specified. Further, it is possible to assign

a value to an element. For relations it is also necessary to indicate

the IDs of the elements between which the relation exists.

Based on the Reference Model and the information structures,

presently an information management system is being developed.

Cost related information

A major advantage of the information structures is the use of

views and filters. A cost view can be constructed, being a helpful

aid in the calculation and analysis of costs. The cost view can be

used by other engineering tasks in order to analyse the conse-

quences of decisions to be made. Further, the associated informa-

tion structures enable a differentiated view of cost information.

The first requirements for cost control are knowledge of the costs

and a generic method to store cost information. Furthermore, it is

Fig. 2: The three information structures

Fig. 3: The objects in the product information structure, with the distinc-

tion between objective and subjective constituents

Fig. 4: The fundamental structure

Fig. 5: Characteristics of elements and relations


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advantageous to have a differentiated view of the costs. This can

be achieved by dividing costs in separate constituents. The next

cost drivers, i.e. cost driving product characteristics, are used [6]:

Geometry

Material

Production Process

Production Planning

The cost drivers can be related to the Product Information Struc-

ture. They become attributes and the cost carriers become ele-

ments in the fundamental structure (fig. 6). For reasons of function

integration, standardisation and modularization, costs are only

allocated to physical product elements. The costs for a relation are

accounted for on a higher aggregation level. For instance, the costs

for connecting two components are accounted for on assembly

level (see fig. 3). An arrangement of the objects in the other in-

formation structures for cost related information is proposed by

Liebers [7].

Example cost related information

The principles of structuring cost related information, described in

the previous section, will be explained with the aid of the com-

puter power box, depicted in fig. 7.

The power box has to protect the electrical components inside and

is made of sheet metal. The box is an assembly consisting of three

components with several features. The holes have different func-

tions. They are used to fix the components, they are needed for

cooling and they enable connectors to be plugged in. The amount

of holes for cooling is determined by the amount of heat to be

transferred. The global structure of the unit, with the cost drivers

allocated to every object, is given in fig. 8.

Zooming in on the cap, results in the structure given in fig. 9. Inthis figure, the central face of the cap (fig. 7: A) with the cooling

holes and a slot for a connector is depicted. The grey areas around

the faces indicate features and the cost drivers are allocated to

these features and the cap itself. The relations between the features

are not depicted in the figure.

The slot consists of three faces and carries some dimensions (L,

R). The slot does not impose restrictions on the material type. The

possible production processes for the slot are nibbling and laser-

cutting. For the time being, all resources for nibbling and laser

cutting are available. The final selection of the production process

can be made based on the cost estimates (assuming the availability

of the resources does not change). The cooling holes have a di-

ameter (D) and they are arranged in a pattern, indicated with a

distance between the holes. The holes dont impose any restric-

tions on the material type. The resources for the only possible

production process "nibbling" are available at the time. The

bending lines have a radius and they dont impose restrictions on

the material. The production process is bending and the resources

are available.

The material type (Al) and the accompanying material costs are

allocated to the cap. The dimensions and tolerances between the

features are related to the cap as well. For instance, the bending

sequence determines the achievable bending accuracy. If the

required tolerances are not met, another bending sequence has to

be selected. The costs for changing resources and set-ups are also

allocated on component level. For example, a set-up change would

be required if the radii of the bending lines would not be the same.Furthermore, the availability of the resources required for the cap

is allocated to the cap.

Fig. 6: The fundamental cost structure

Fig. 7: A computer power box [6]

Fig. 8: The global structure of the computer power box

Fig. 9: Detail of the cost drivers of the cap of the computer power box


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From the explanation of fig. 9, it is clear that the cost drivers are

influenced by the decisions of the engineering tasks design, proc-

ess planning and production planning. Opposite of that, the deci-

sions of an engineering task can be supported with cost informa-

tion.

That the difference between the allocation of costs in case a design

feature is not equal to that of a manufacturing feature becomes

visible in fig. 10 (presuming that the designer did not have a de-

sign feature describing the strip). Generally, if the strip is pro-

duced in small batches, the features of the strip will be produced

with different tools. Therefore, the costs are allocated to the sepa-

rate features. In case of mass production, a special tool is likely to

be available. In that case, the costs are allocated to the group of

features.

Generative cost estimation

With the cost drivers of an element, the costs can be calculated

and be attached to the element. The costs and the cost drivers can

be used to analyse the costs of a product.

In the upper part of fig. 11, the global structure of the computer

power box is given, together with the costs for some elements and

some cost drivers. The costs of the component on the right (10), is

the summation of the process costs of the two features (2 and 4)

and the material costs of the component (4). The total costs (80)

equals the costs of the components (50, 10 and 10) and the assem-

bly costs of the components (10).

When the costs of a product are known, it is relatively easy to

control the costs by means of the product information structure. It

is relatively easy to find "irrational" designs [8]. Fig. 11 revealsthat the component on the left side of the figure constitutes more

than 60% of the total costs. When zooming in on this component,

it becomes clear that the production costs of one of the features is

relatively high. Based on this knowledge a redesign of the feature

or the entire component may be justified.

Another way of cost control can be achieved by introducing option

points. For one of the components of the assembly in fig. 12 three

alternatives exist. For every alternative, the costs can easily be

calculated. When a choice between the alternatives has to be

made, the cost estimates can be used to compare the costs of the

three components. An alternative can also be to buy such a part

instead of to make that part. The buy-part is not specified in detail,

only the price of the supplier is allocated to the component.

During every engineering task, the costs can be monitored through

the cost view. Whenever the product information is modified, the

effects on the costs can be made visible by redoing the cost cal-

culation for the new situation. Additionally, during every engi-

neering task one can easily compare alternatives based on cost

information.

Variant cost estimation

The product information structures of instantiated products, con-

taining cost information, are stored in the order information

structure. When a new product has to be designed or manufac-

tured, the (partial) product structure of the new product can be

compared with previously manufactured products. When the new

product corresponds to a previously manufactured product, in a

sufficient manner for certain characteristics, the previously manu-

factured product can be used to estimate the costs for the new

product.

The basic principle is to compare the elements of a new product

with the elements of previously manufactured products [9]. The

comparison is type based (see fig. 5). Depending on the available

information of the new product, the characteristics of the type ofelement are also compared. Based on this comparison, the level of

similarity is calculated.

The comparison algorithm can be controlled by setting some

preferential variables. The extend of requested similarity has to be

set. When the similarity between a previously manufactured prod-

uct and the new product is lower than the requested extend of

similarity, the product is not considered in the cost estimation. For

every engineering task not every product characteristic is evenly

important. Therefore, it is possible to indicate, for a group of

related characteristics, the extend of similarity.

If a previously manufactured product does not meet the requestedsimilarity, it must be possible to leave out the elements that cause

the low extend of similarity. Since the costs of a product are

known for every product element, a temporarily cost value can be

Fig. 10: The cost attributes of the strip

Fig. 11: Cost calculation and cost control for the computer power box

Fig. 12: Cost calculation of the computer power box


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calculated without including the elements that are not similar. In

that case, that product can still be used for the cost estimate.

Hybrid cost estimation

For the structuring of the costs, it is not important how they are

calculated. Because the costs are attached to product elements, it is

possible to calculate them with different calculation methods. So,

generative cost estimation and variant cost estimation can be

applied to the same product. In addition, other types of cost esti-

mation, e.g. based on neural networks, can easily be integrated.

The only condition is the existence of an interface to the informa-

tion management system.

For the engineering tasks that employ cost estimates for decision

making, it is not important to know how the cost estimates were

calculated. The information needed is a cost estimate with an

indication about the reliability of the estimate.

The way in which the cost estimates are determined depends on

the available information, the available time and the required

accuracy of the estimate; a different choice can be made for every

different product element. In case the available information of a

section of a product is low, variant-based cost estimation has to be

used for that section. If sections of the product are specified in

more detail, generative cost estimation can be used for these sec-

tions. When the available information is low and the available

time for the cost estimation is high, the cost estimation system can

activate another engineering task to generate more detailed manu-

facturing instruction information of the product. For instance,

when a cost estimate for a newly designed product is requested,

process planning can be activated in order to generate more infor-

mation for the cost estimation process.

Cost estimation architecture

The information management system described above deals with

the manipulation of information and the representation of the

different views on the information. It is used as the basis for a cost

estimation system. In this way, the functional modules of a cost

estimation system dont need to incorporate database functionali-

ties, but solely the cost estimation functionalities. Before discuss-

ing the functional modules of the proposed cost estimation archi-

tecture, the functional specification of a cost estimation system is

listed.

A cost estimation system must be able to:

calculate costs in a generative, variant based or hybrid way;

deal with different cost models;

handle different cost types;

apply different analysis tools for cost related information;

calculate costs on different aggregation levels;

support other engineering tasks, such as:

-

order acceptance;

- design;

-

process planning;

-

production planning;

-

calculation of the actual costs;

-

management.

generate reports for other engineering tasks;

communicate with the information management system.

A cost estimation system has to be:

modular;

The advantages of a modular system are the possibility of integra-

tion with other software packages, the possibility of extending the

system and an appropriate environment for maintenance [5].

transparent;

The use of the system should be easy to understand.

highly automatic;

Nevertheless, the user must have the possibility to intervene the

cost calculation at any time.

With these functional specifications and the functional modules of

the cost control architecture, a cost estimation architecture has

been developed (fig. 13). Six functional modules are distin-

guished, which are arranged around the Information Management

kernel. The six functional modules are:

Cost Models (CM):

This module is used to define the cost models. The module has to

be generic to enable the definition of different cost models and the

use of different types of costs and formulas. The storage and

retrieval of the cost models must be dealt with by the information

management system.

Cost Determination (CD):

This module has to carry out the actual calculation of the costs,

based on the selected cost model. Depending on the type of cal-

culation, actual production data or estimated data are used.

Cost Reports (CR):

This module is intended to define different cost reports. The type

of information in the report must be indicated so that the Data

Tuning module can collect the necessary data and deduce the

requested data.

Data Analysis (DA):

Historic data needed for calculations have to be analysed, e.g.averages, variances and trends are needed to be able to use historic

data in the right way. This module must also compare the esti-

mated costs with the actual costs in order to improve the cost

models.

Risk Analysis (RA):

An important aspect of the costs is an indication of the accuracy of

the estimation. The sensitivity of the costs to changes of the pa-

rameter values in the cost model must also be known [2]. This

module must take care of all the aspects concerning quality, accu-

racy and sensitivity of cost estimates. The data needed for these

aspects is obtained through the information management system.

Data Tuning (DT):

In many cases, data first have to be transformed to be able to useit. Some examples are the tuning of currencies and the correction

for inflation. Another aspect is to arrange data for a certain selec-

tion e.g. for a time interval or a product family. When (non-

Fig. 13: The cost estimation architecture


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repetitive) disturbances occur during production, the production

data have to be corrected, when possible.

With these six modules, all the functional specifications of the

cost estimation system can be realised. Furthermore, practical

characteristics such as time saving, flexibility, user-friendliness

for inexperienced users and unification of the cost estimation

process [2] must be achievable. After the three main modules

(CM, CD, CR) are implemented, the integration of the cost archi-

tecture can be verified.

Similar architectures, i.e. functional modules arranged around the

Information Management kernel, can be created for every engi-

neering task [10]. An architecture for computer aided process

planning for sheet metal was presented by Lutters [11]. For exam-

ple, environmental control and quality control will have an archi-

tecture very similar to cost estimation.

Cost control architecture

The major function of cost control is the feedback of cost related

information. Actually, two feedback loops can be distinguished.

The engineering and planning tasks generate (alternative) solu-

tions to manufacture a product. Based on a solution, a cost esti-

mate can be made. Depending on the outcome of the estimate, an

alternative solution can be chosen or the solution can be adapted.

This applies to a short-term cost control loop.

If an economic solution is found, the accompanying production

plans can be executed. During the production, the actual produc-

tion data have to be collected. These data are used to determine

the actual manufacturing costs. The data also have to be analysed

to be able to use them to create or to adapt the cost model. With a

new or adapted cost model, new cost estimates can be made. This

is a long-term cost control loop.

In fig. 14, the generic cost control architecture of Liebers is de-

picted [12]. The architecture is valid for any kind of information

used in the design and manufacturing phase. It contains four func-

tions needed to execute the two control loops:

cost estimation (F1): determination of the costs before the

actual production;

monitoring (F2): acquisition of relevant data at the time of

execution of the production process;

diagnostics (F3): interpretation of data of the monitoring

process;

cost modelling (F4): creating or adapting cost models with the

help of data of diagnostics and monitoring.

Loop 1 is the short-term control loop and loop 2 is the long-term

control loop.

Conclusion

Information management and the use of information structures

enable the construction of a cost view and differentiated repre-

sentations of the costs. The costs can be calculated for every ag-

gregation level of a product. The characteristics of the information

structures enable adequate support of design and engineering tasks

with cost information. By means of the product information

structure, the origin of costs is exposed and the cost drivers indi-

cate the cause of the costs. The consequences of decisions made

by designers and planners are directly available and the choice

between design alternatives can be made based on the estimated

costs.

Because information management deals with all the handling of

information, the functions of the cost estimation architecture need

only to be focussed on cost estimation. Given that the Information

Management System is suitable for every manufacturing environ-

ment, the cost estimation system built on it is also applicable in

every manufacturing environment.

Based on the Information Management System and the cost esti-

mation architecture, the development of a truly integrated cost

control system is possible.

References

1

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2 Luong, L.H.S.; Spedding, T.:An integrated system for process plan-ning and cost estimation in hole making, Int. Journal of AdvancedManufacturing Technology, 10 (6), (1995), pp. 411-415.

3 Cuesta, E.; Rico, J.C.; Mateos, S.; Suarez, C.M.:Times and costsanalysis for sheet-metal cutting processes in an integratedCAD/CAM system, Int. Journal of Production Research, Vol. 36, no.6, (1998), pp. 1733-1747.

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framework for cost estimation and cost control in product design,Proc. of the 6th Int. Conf. on Sheet Metal, Vol. II, (1998), pp. 231-242.

7 Liebers, A.; Streppel, A.H.; Kals, H.J.J.:An information structure forcost related decision support, Proc. of the IMC-14 Conf., Vol. 14,(1997), pp. 555-564.

8 Ou-Yang, C.; Lin, T.S.: Developing an integrated framework forfeature-based early manufacturing cost estimation, Int. Journal ofAdvanced Manufacturing Technology, 13 (9), (1997), pp. 618-629.

9 Brinke, E. ten; Lutters, D; Streppel, A.H.; Kals, H.J.J.:Variant costestimation based on Information Management; Proc. of the 15th Int.Conf. on Production Research, Limerick, Ireland (to be published1999).

10 Kals, H.J.J.; Lutters, D.: The role of Information management inintelligent manufacturing, Proc. of the CIRP Int. Conf. on IntelligentComputation in Manufacturing Engineering, (1998), pp. 21-28.

11 Lutters, D.; Brinke, E. ten; Streppel, A.H.; Kals, H.J.J.:ComputerAided Process Planning for Sheet Metal based on Information Man-

agement, Proc. of the 6th Int. Conf. on Sheet Metal, Vol. II, (1998),pp. 159-170.

12 Liebers, A.:An architecture for cost control in manufacturing: theuse of cost information in order-related decisions, Ph.D. thesis Uni-versity of Twente, Enschede, The Netherlands, (1998).

Fig. 14: The cost control architecture

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