Mar 202014
 

Hiller Associates posted the following article at ENGINEERING.COM yesterday.  You can read it there at this link, or just keep reading below!

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Another solid piton in the cliff of making product cost mainstream in CAD / PLM Products?

CATIA users can now get a faster and more effective way to design and source composites products with the highest profit by bringing the estimation ability closer to the designer’s native environment. Galorath Incorporated debuted its newest integration of SEER® for Manufacturing with the Dassault Systems 3DEXPERIENCE® Platform in CATIA at the JEC Composites conference in Paris. The new product is called the SEER Ply Cost Estimator.

Who is involved?

Hiller_Associates_Seer_Catia

Galorath Incorporated grew out of a consulting practice focused on product cost estimation, control, and reduction that began in the late 1970

s. Over the last 30 years, Galorath built their costing knowledge into the SEER suite of software products. SEER is one of the independent product cost estimating software companies.

Dassualt Systems is one of the “big 3” Product Lifecycle Management (PLM) companies in the world.

Hiller Associates spoke with Galorath CEO Dan Galorath, Vice President of Sales & Marketing Brian Glauser, and SEER for Manufacturing product lead Dr. Chris Rush and got a full product demo.

What does this integration do?

The integration allows users of CATIA to use SEER’s costing software for composite materials within the CATIA environment. In CATIA, the engineer designs a lay-up for a composite part, generating a Ply Table (a critical design artifact for composite parts that specifies material, geometry, and some manufacturing info). That activates the integrated SEER Ply Cost Estimator so that the designer (or the cost engineer or purchasing person aiding him) can set up more part-specific costing choices and preferences within the CATIA environment.

When ready, the user pushes the cost analysis button. The information is processed by SEER Ply Cost Estimator which sends the ply table data and other information to the interfacing SEER-MFG software to compute cost. The cost data is returned and presented to the user, once again within a native CATIA screen.

How broad is the capability?

Click to ENLARGE!

Click to ENLARGE!

Currently, the integration of SEER is applicable for parts made of composite materials. It’s a strong starting point for the integration partnership because SEER has a long experience in the field of costing composites, working with companies in the defense and aerospace verticals. Composites are also becoming more mainstream in other industries, such as automotive and consumer products. Galorath has been a major player in the US Government’s Composites Affordability Initiative (CAI), a 50/50 government/industry funded consortium including Boeing, Lockheed and Northrop Grumman that was formed to drive down the costs of composites. Galorath has also worked with Airbus in the area of composites parts costing.

Galorath’s Brian Glauser says that the SEER Ply Cost Estimator has hundreds of man-years invested, much from previous work with CAI and with aerospace companies that resulted in several of the modules already in the SEER-MFG standalone product.

The first version of the SEER Ply Cost Estimator handles many composites manufacturing processes, materials, concepts of complexity, and both variable and tooling costs. However, it does not yet directly cost the assembly of one part to another.

The initial integration will be to CATIA v5, but SEER and CATIA have signed a v6 agreement as well. That integration will follow later.

Galorath (and likely Dassault) are hoping that the SEER Ply Cost Estimator will be well received by customers and help drive many product cost benefits. If this happens, there may be demand from Dassualt’s end customers not only to improve the SEER Ply Cost Estimator, but to expand the SEER/CATIA integration to other manufacturing processes covered in SEER’s stand-alone software products such as machining, plastics, sheet metal and assembly processes.

What does it mean for Functional Level Groups?

Philippe Laufer, the CEO of CATIA was quoted saying :

“Using Galorath’s SEER for Manufacturing in CATIA…will help companies perform early trade-off analysis on the use of various materials and composites processes before manufacturing even takes place.”

Well, that has been one of the goals in Product Cost Management for a long time. If your company uses composites, the tool has the following possibilities:

  • Engineering – identify which design choices are driving cost and by how much
  • Purchasing/Manufacturing – get an early warning of what to expect from suppliers before asking for quotes or estimates (should-cost)
  • Cost Engineering –focal point for the cross-functional discussion about cost to drive participation, especially from engineering

It’s important to realize that this integration will have its limitations, as with any costing product. First, the current integration applies only to composites. While expensive, composites are only one type of part on the Bill of Material (BOM). You will have to go beyond the current integration of SEER/CATIA to cost the full BOM, perhaps to SEER’s standalone costing product or to those of its competitors.

Second, remember that cost is far harder to “accurately” estimate than many physical performance characteristics. While meeting an absolute cost target is important, even more important are the following:

  1. Continuous Design Cost Improvement – If your company consistently designs lower cost products because you have superior cost estimation information, you WILL beat your competitors.
  2. Correct Cost and Margin Negotiation – If your company is better at negotiating quotes because it can give suppliers a better understanding of what it will cost them to make your part and you can negotiate a margin that is not too high, but adequate to keep your suppliers healthy, you WILL beat your competitors1.

What does it mean for the C-Level?

Philippe Laufer of CATIA also says:

“This [the SEER Composites integration] leads to finding out the most efficient way of manufacturing a product while meeting cost, performance, functionality, and appearance requirements.”

The C-suite doesn’t really care about composites or ply tables in and of themselves, but it does care about revenue and profit. Of course every well-marketed product will claim to improve these metrics. Regarding product cost, the good news is that Galorath and Dassault are aiming at a big target. Companies that use a lot of composites can have very high costs. For example, Boeing and Airbus have Cost of Goods Sold of 84.6% and 85.5% and Earnings before Tax of 7.2 and 3.6%, respectively2. Those COGS figures are big targets on top of a highly leveraged COGS/Profit ratio.

What does it mean for Product Cost Management becoming mainstream in the enterprise software stack?

We asked Dan Galorath how long it would be before Product Cost Management was as much of the PLM ecosystem as finite element, manufacturing simulation, or environmental compliance. He replied:

“Cost estimation software will never be on every designer’s workstation, but I don’t believe that is what it means for Product Cost Management to be considered ‘mainstream.’ It’s not fully mainstream yet, but a greater need is being driven by outsourcing and the tight business environment. The procurement folks can’t only rely on internal manufacturing knowledge like they used to. They need tools like SEER to fill the gap and move the cost knowledge base forward.”

We agree with Mr. Galorath. This is another step, another piton to secure Product Cost Management onto the PLM cliff, as PCM continues to climb this steep hill.

This is the first integration point between independent Product Cost Management software companies and the PLM/ERP world since September 2012, when Siemens PLM purchased Tsetinis Perfect Costing3. PTC has built some level of cost tracking ability into Windchill, and Solidworks (owned by Dassault) has developed the first couple versions of a costing calculation module for their product.

There is still a lot of ground to cover. There are quite a few independent product cost management software tools that have costing intellectual property that can accelerate the process, especially if the big PLM companies acquire them or partner with them. When that will happen is anybody’s guess, but for now it looks like CATIA users, at least, have a viable solution for composites costing… and maybe more in the future.

1 For more information, see the Hiller Associates Industry Week Article: Your Should-cost Number is Wrong, But It Doesn’t Matter

2 Per www.morningstar.com, trailing 12 months COGS, 3/13/2014

3 Siemens buys Perfect Costing Solutions (Tsetinis), Hiller Associates, September 2012

Jun 172013
 

 

We spend a lot of time thinking about how organizations can improve Product Cost Management. After all, it’s our job at Hiller Associates, but we’re also very passionate about it. We’ve often wondered, why is it that there are so many people in Product Cost Management who are very intelligent and hardworking individuals, and yet the field, in most organizations, does not advance.

Why is this?

 

  • We don’t think it’s due to lack of effort.
  • We don’t think it’s due to lack of intelligence.
  • It may be due, in part, because the tools in the area are not that great, at least until recently. However, we don’t think that’s the cause either.

We have concluded that one of the biggest problems is that most Product Cost Management Experts are independent acoustic live performers.

Sing me a song!

What do we mean by that ? Well, if you go into the average product company and meet the Product Cost Management organization, it usually consists of a very small group of experts. They typically are sequestered in some back office.  They appear to be a covert operation of some large organization, such as purchasing. When you meet them, they are almost always hardworking people , who looked frazzled, but still have their noses to the grindstone.  They are busily trying to avoid product cost before launch and wringing cost out after the start of operations.

Traditional PCM experts are like solo classical musicians. They improvise solo (excel spreadsheets) or play an expensive instrument (an expert tool). They play for command performances before the nobles. In this case, the noble is whatever manager is in the most desperate trouble at the time. The PCM guys are always overworked, but their solution to this is to work harder. Just like a classical live musician, they can only be at one place at one time. Their performances are beautiful to listen to, but there is no recording, nor is there a broadcast, so that others in the world can hear the wonderful music they make. They really are a solo act.

We show this on the diagram below by showing the simple sine wave representing the music they sing. Pound for pound, person for person, no one can save more cost than these soloists, singing their song live and alone. However, as with any organizations that relies on people to scale, it can all only scale so large, and it can only scale so fast . That is why professional services companies are typically very small. The growth of the company is limited by the expert resources they can find. Think of this versus a product company, where once the product is designed, it can be replicated very quickly through the magic of manufacturing.

Product Cost Management Rock Star Hiller Associates

CLICK TO ENLARGE!

Time to Crossover to Being a Rock Star

It’s time for product cost management groups to stop being solo live classical musicians  and crossover, as they say in the music biz, to be rock stars. On the diagram to the right, look at the traditional path vs. a maximum performance path. It’s time for PCM experts to spend less time playing alone and move to being Rock Stars (and maybe the director of the band). In this arrangement, the musician continues to do a lot of what he does today. He composes and produces the music. The music itself is the technical expertise needed for product cost management, but the expert should be sharing it with the entire organization, not just a few people in solo performances. This requires that he have a *vision* for Product Cost Management. This is not a vision for how to cost model the next part or assembly, but where the organization is today and where he wants it to get to in the future.

This Amp Goes to 11

The key to success is to amplify the music made by the Product Cost Management expert. To do this, you need to find the right management champion. Management is an amplifier, because their job is to receive the good ideas that their people bring them and then boost the signal on the idea to the rest of the organization. Management also parses the signal to the right speakers in the organization that can most beautifully and powerfully and produce that signal. Think about a modern 5.1 or 7.1 home theater system, where the amp or receiver parses the signal and sends the right frequencies to the right speakers.

And, if you’re going to be a Product Cost Management rock star, you want the biggest and highest quality amp you can get. You would be pitching your vision at the VP or C-level. Remember the movie Spinal Tap? You want the amp that goes to 11!

The Recording Industry

Every rock star is going to both tour and record. The management amplifier lets you to play to stadiums full of people. But you also need to record it, so that your fans can hear it over and over. To generate maximum profit for the organization, the fans (engineering, purchasing, manufacturing, etc.) needs to be able to execute on your PCM vision. Many times that music will need to play when you can’t be there. You record by (1) changing the culture and (2) designing a PCM process that the organization can follow.

Money for Nothing and Your Savings for Free

The rewards to the organization when the PCM team moves from live classical performers to rock stars are very enticing. Although the results of the individual product cost manager experts will certainly be smaller, the rest of the organization now is producing results as well. Together, they will produce many more cost savings and far more the cost avoidance than the Product Cost Management expert could do alone.

The Path to Stardom

We realize that moving to the rock star model will initially be uncomfortable for some people who are experts. It’s hard for experts to let go of control, especially on a complex set of activities like Product Cost Management. There will be mistakes by the organization. There will need to be teaching. The system may be chaotic at first. That’s OK. This is the only way to get to a better state. It also means that the individual product cost expert will have to spend LESS time actually producing results on his own. His time needs to be used developing vision, casting vision, teaching, strategizing, and leading the organization. He doesn’t have to compose that vision and record it alone. His executive sponsor can help get him some great song writers and producers, both internal to the organization and through external consulting partners. And the executive champion will also fund these resources.

Therefore, it is critical to find the right management sponsor who understands the benefits of moving from a solo live performance model to the recorded rock star model. The management sponsor needs to have the authority to reduce the individual PCM demands on the expert. The expert must produce less individually so the organization can produce more as a whole.

Product Cost Management – Behind the Music…

Sadly, looking back at my time as a CEO and then the Chief Product Officer at a company that made Product Cost Management software , and in my current roll as a strategic consultant, I have never seen this rock star transition be driven by the musician (the Product Cost Management expert). Every time I’ve seen organization move the needle on Product Cost Management, the impetus for that change was an executive sponsor who had a vision for a better world. The executive sponsor (typically in engineering, purchasing, or a product owner) was poking his nose into the world of product cost, sometimes knowing very little about it. Paradoxically and sadly, often the existing Product Cost Management organization, instead of being grateful for the help and wanting to get made into a rock star, was resistant or even resentful of the help. That’s too bad, because rock stars make a lot more money than classical musicians, and often have far better job security. (People are going to pay to see Aerosmith until they die.)

So, my advice to you is that if you want to become critical to your management, be noticed in the organization, see your organization produce far better results, and get rewarded for doing it, it’s time to stop playing acoustic solos live.

It’s time for you to become a rock star.

 

Feb 112013
 

There were a lot of comments last week to the article we posted with the title: Only 17% Percent of Companies Meet Product Cost Target

Many people complained about the dearth of knowledge of the design engineer in Design for Manufacturability.  In the discussion, we also started to propose some solutions to overcome this problem.  However, one comment that sparked my interest was a comment about WHY design engineers often overtolerance parts that went beyond “they don’t know any better.”   The comment paraphrased was:

A big problem we have is that we are making parts directly from the CAD model. A lot of Catia based models have a general tolerance of +- .005 [in.] on the entire part .including fillet radii and edge breaks. …these features have to be penciled off with a ball end mill instead of using a standard tool with a radius on it can kill profit on a job when you miss it when quoting.

That is a fascinating observation.  There is no doubt that the Product Lifecycle Management companies will be pleased as punch that people are finally taking their drum beating on “model is master” seriously.  FYI – I agree that the model should be master and that drawings should be generated from the 3d master data.  However, this improvement to PLM adherence highlights what happens when new technology (a tool) is foisted upon a problem without without understanding the current processes and outcomes that the incumbent tool is satisfying.  In this case, the old tool is paper drawings.  With the incumbent tool, there was a title standard block that for companies, and that title block would give helpful bounding constraints such as:

Unless otherwise specified:

All dimensions +/- o.o1 inches

All radius and fillets +/1 0.02 inches

Etc.

That helpful and protective title block may not be there with a 3d, model onl,y strategy.  All the evangelism on “tolerance by exception” goes right out the window what the CAD system now has default values that are overtoleranced by definition.  The CAD system itself becomes… The Evil Robot Overtolerancer.

The good news is that the Evil Robots can be controlled, and you don’t even need anyone named Yoshimi to help you do it.  However, it will require some thought, before you change the default tolerances in your CAD system.  Some considerations to think about are:Yoshimi Product Cost Hiller Associates

  • What were the default tolerances in the title block on your drawings when the drawing was master?
  • Can these tolerances be reduced?
  • How surgically will your CAD system allow you to set default tolerances?
  • Do you need different tolerence ‘templates’ depending on the primary manufacturing process.  E.G. tolerance defaults may be very different for a casting that is machined than for a piece of sheet metal.
  • How will you make your design engineers aware of these new default tolerances?

Whatever decision you make, make sure all the right people are at the table to make it together, including design engineering, the drafting team (if separate from design), purchasing, and manufacturing (including suppliers, if parts are made externally).  If done thoughtfully and correctly, the setting of default tolerance will bring the Evil Robot Overtolerancer under control.  If these changes are made in a vacuum or carelessly, you may find that you have made the Evil Robot 10x more powerful as an agent of chaos and profit destruction.

You want to be dealing with the friendly Autobots, not the Decepticons, right?

transformers product cost hiller associates

That’s today’s Product Cost Killing Tip!

If you have Product Cost Killing tips that you would like to share, please send them to answerstoquestions@hillerassociates.com.

 

 

 

 

 

 

Apr 162012
 

Costing of electronic parts is a whole different ballgame from mechanical parts, most of the time.  While there are certainly custom ASICS and other custom electronic components, for the most part, electronics are more and more dominated by standard components (off the shelf processors, resistors, memory, capacitors, LEDs, etc.).  One person at Morey Corporation who I interviewed for my upcoming book project on Product Cost Management, referred to these components affectionately as “popcorn.”  The ME (mechanical engineer) equivalent of this is the beloved category of “hardware” or “fasteners.”

The good news is that there is a commodity market for these EE (electrical engineer) components.  The “market” drives the cost down for you with many (theoretically) interchangeable vendors of the same part.  This is very different from most mechanical parts, which are unique and must be sourced to specific suppliers for custom quotes.  That’s the good news.

The bad news is that in the fast paced EE world, you have to start worrying about things, such as:

  • Pricing Currency — How do I quickly find the lowest cost whenever I buy these components.  Unlike the non-commodity world, the price will change often and quickly (and typically downward), until the component starts becoming obsolete.
  • Obsolescence — Have you ever been looking for a new USB drive or laptop memory for your old computer, only to realize that the 2 GB stick is MORE expensive than the 4 GB stick?  Well, you have encountered the effect of obsolescence in pricing.  So you might ask, how to I know when the price is starting to rise due to obsolescence, because maybe I’ll make a large purchase at that point?
  • Availability — where do I buy enough of what I need now?

Well, never fear, because the helpful folks over at Arena  (a cloud based PLM provider) and Octopart (a search engine for electronic components) are here to help.  Arena has a new (free) tool called PartsList that works like this:

  1. Download the tool here
  2. Put in your BOM (manufacturer and part number) to PartsList
  3. PartsList will link to Octopart to keep you aware of all pricing and availability, identify alternative sources, etc. goodness

You can also directly search for parts in Octopart.   PartsList is FREE for personal use and, as of 4/6/12, was $9/month for commercial use.  You can read more about PartsList on the Arena blog here article about it.

 

(p.s. Do check out Morey Corporation, if you need hardened and rugged electronics.  Not only are they great guys, but they are the real deal — an AMERICAN MANUFACTURER with design and manufacturing in one building in the good ‘ol Midwest.  They make stuff from advanced telematics to engine computers you can drop off a tall ladder on a cement floor without failure, to power inverters the size of card tables that move big equipment.)

 

 

 

Apr 102012
 

 

On the last blog post (Product Cost Management – What is it?), I talked the different ways that my colleagues and I have seen the meaning of Product Cost Management take shape over our careers and PCM’s development.  I offered what I believe is a good operating definition of PCM:

 

Product Cost Management – An agreed, coherent, and publicized system of culture/goals, processes, people, and tools following the product lifecycle, that ensures the product meets its profit (or cost) target on the day that it launches to the customer.

This definition can certainly be fleshed out further.  I was at a conference a few weeks ago and heard a great presentation on social media by Overdrive Interactive. Part of the presentation was showing their map of the social media sphere that has become viral on the internet and the de facto standard many people use to orient themselves to the social web. I really liked that idea, and I’m a big believer in 1-page maps that give the reader an overview of a complex subject, as well as a starting point to dig for deeper detail.

What does Product Cost Management look like from a graphical viewpoint?   I believe that it looks like the attached map (click on the diagram to enlarge the map or DOWNLOAD IT IN .PDF FORMAT.

Like any other major discipline that product companies follow, PCM contains four main areas:

  1. Culture, Goals, and Incentives
  2. Processes (tied to the product life cycle)
  3. Team Structure and Participants (tied to the product life cycle)
  4. Tools/Software that can help

    World Map of Product Cost Management Hiller Associates

    CLICK TO ENLARGE!

Culture, Goals, Incentives – before attempting to put in place any process, people, or tools, the organization first has to ask the tough strategic questions.   Where is our organization today in the PCM journey? To where does we hope to get and by when? And the big question: What is the priority of PCM and how much investment (honestly) will we make to close the gap from between today’s state to our goal? Once the company answers these questions, it can talk about the strategic structures that drive behavior (roles, incentives, and leadership support).

The next two continents on the PCM world map  (PCM Processes, and PCM Tools/Software) follow the product lifecycle, and need to integrate with the company’s product development process. Different processes and different participants are appropriate at different points in the cycle.

Finally, we have the PCM Tools available to take on the journey.  They fall into different buckets as follows:  (a) homegrown tools (including Excel), (b) general platforms (e.g. PLM, ERP) that may be customized, and (c) specialty Best-In-Class (BIC) tools that focus on PCM processes. In the PCM World Map, many of the major BIC software systems are shown in a 2×2 diagram. We’ll discuss the 2×2 in more detail in a future post, but I don’t want readers to think there is a “magic [best] quadrant” in this 2×2. It is simply a descriptive conceptual diagram

One important thing for people who are navigating the map to realize is that Culture, Process, Team, and Tools are all interconnected and influence one another (see the top right in the header of the map). For example, if you are at the beginning of the PCM journey, it is likely that your company is not ready for all the processes shown. It also may only use one or two of the tools. The company may not have reached a capability level to benefit from some processes, people, or teams.  Despite the inter-connectivity of the system, the best place to start when beginning the PCM journey is with the Culture (see blue arrows on the left of the map).

Like all high level maps, there are cities and even countries shown on it that have more detailed maps of their own.  However, most companies would do well to focus on understanding the geography at the world level first, before hoping on a plane to a specific city.  We can worry about street maps once we decide which cities we are going to visit!

 

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