Analysis of cost estimating processes used within a concurrent engineering environment throughout a product life cycle

Christopher Rush, Dr. Rajkumar Roy,

Department of Enterprise Integration, SIMS, Cranfield University, Cranfield, Bedford, MK43 OAL, United Kingdom. Tel: 44 (0) 1254 765261. Email: [email protected] Tel: 44 (0) 1234 754073. Email: [email protected]

Abstract
Concurrent engineering environments affect the cost estimating and engineering capability of an organisation. Cost estimating tools become outdated and need changing in order to reflect the new environment. This is essential, since cost estimating is the start of the cost management process and influences the go, no go decisions concerning a new product development. This paper examines both traditional and more recent developments in order to highlight their advantages and limitations. The analysis includes parametric estimating, feature based costing, artificial intelligence, and cost management techniques. This study was deemed necessary because recent investigations carried out by Cranfield University highlighted that many concurrent engineering companies are not making efficient, wide spread use of existing estimating and cost management tools. In order to promote more efficient use of the discussed estimating processes within the twenty first century, this paper highlights the work of a leading European aerospace manufacturer and their efforts to develop a more seamless estimating environment. Furthermore, a matrix is developed that illustrates particular concurrent engineering environments to which each technique is aptly suited.

1. Introduction
Cost is perhaps the most influential factor in the outcome of a product or service within many of todays industries. More often than not, reducing cost is essential for survival. To compete and qualify, companies are increasingly required to improve their quality, flexibility, product variety, and novelty while consistently maintaining or reducing their costs. In short, customers expect higher quality at an ever-decreasing cost. Not surprisingly, cost reduction initiatives are essential within todays highly competitive market place. Concurrent engineering is one such initiative. Since cost has become such an important factor of success, project development needs to be carefully considered and planned. Recent

research demonstrates that companies unable to provide detailed, meaningful cost estimates, at the early development phases, have a significant higher percentage of programs behind schedule with higher development costs, than those that can provide completed cost estimates [1]. Therefore, it is essential that the cost of a new project development be understood before it actually begins. It could mean the difference between success and failure. This article is divided into three broad sections. The first highlights the increasing need for effective cost estimating and cost management techniques within a concurrent engineering environment. Cost estimating being defined as the process of predicting the cost/outcome of an as yet undefined project, and cost management being defined as a technique for managing the development processes in order to achieve the estimate. The second section of the paper discusses several available estimating and cost management techniques, in order to provide a broad overview and to better understand where and when to use them within a project life cycle. Furthermore, it promotes awareness concerning the traditional and more state of the art techniques that have emerged over the last decade. The final section presents a snapshot view of several leading concurrent engineering companies, which demonstrates how estimating and cost management techniques are being utilised within industry. This study highlights a general lack of structure and order concerning the use of current estimating techniques within concurrent engineering environments. In an attempt to counter this problem a matrix is developed to assist the choice of applying an estimating technique at different stages of a product lifecycle.

2. The need for cost estimating/engineering

Cost estimating helps companies with decisionmaking, cost management, and budgeting with respect to product development. It is a methodology used for predicting/forecasting the cost of a work activity or output

[2]. It is the start of the cost management process. Cost estimates during the early stages of product development are crucial. They influence the go, no go decision concerning a new development. If an estimate is too high it could mean the loss of business to a competitor. If the estimate is too low it could mean the company is unable to produce the product and make a reasonable profit. Many authors agree that 70-80% of a product cost is committed during the concept phase [2, 3, 4, 5]. Making a wrong decision at this stage is extremely costly further down the development process (see Figure 1). Product modifications and process alterations are more expensive the later they occur in the development cycle. Thus, cost estimators need to approximate the true cost of producing a product, based on empirical data, with the purpose of satisfying both the customer and company. Cost
Cost committed
Scope for Production Cost Reduction.

3. Cost estimating within a concurrent engineering environment

An optimised concurrent engineering environment provides an opportunity to substantially reduce the total cost of a project. This is because, integrated product teams (IPTs) containing members of various skilled disciplines, enable a simultaneous contribution to an early product development and definition. Therefore, within a fully integrated product development (IPD) cycle, multidisciplinary teams working together increase the likelihood of a reduced lifecycle cost by avoiding costly alterations later in the design process. With this view in mind, concurrent engineering is a great step forward when compared to an over the wall mentality, where each department works in isolation. However, a concurrent engineering environment presents many new challenges to cost estimators whom, it could be argued, are more used to predicting the cost of an over the wall environment. The impacts from adopting a concurrent engineering philosophy are substantial and often require significant changes to long-standing working practices. The whole culture begins to change. Existing costing methods and systems soon become outdated and require updating to reflect the new environment. Thus, estimators find it extremely difficult to predict cost within this new environment with their existing tools. This is not all bad because it offers an opportunity to introduce new approaches to old and possibly outdated working practices. This could cause difficulty for some, since advances in technology and techniques have grown rapidly over the last decade. This period of change could be a daunting prospect unless practitioners have had the opportunity to follow recent trends and developments. The remainder of this paper attempts to highlight and dispel some of the mystique behind several state-of-the-artestimating techniques, in order to make aware the choices that are currently available.

70 80%

Cost incurred

Concept phases

Time
Production

Figure 1: Cost commitment curve The difficulties of estimating at the conceptual design phase are well recognised [6, 7, 8, 9]. The major obstacles estimators need to address are: Working with a limited amount of available data concerning the new development; Accounting for step changes within technology over the life span of a product development; a more pronounced problem within the aerospace industry; The requirements to show how cost estimates were derived including the assumptions and risks, and; The estimates need to be accurate. Therefore estimators/engineers need company-wide co-operation and support, to assist them with their decision making. Concurrent engineering is an excellent initiative to assist this process; however, it does present a new set of challenges as outlined below.

4. Cost estimating methods

4.1. Traditional cost estimating

In traditional costing there are two main estimates: a "first sight" estimate, which is done early in the cost stage, and a detailed estimate, done to calculate costs precisely. The former of these cost-estimating methods is largely based around the experience of the estimator. For example it is not uncommon for a "first sight" project estimate to be based upon a past similar project or purely on experience in costing. However, to attain this level of experience takes years of apprenticeship and considerable oversight from senior estimators. Although useful for a

rough order of magnitude estimate, this type of estimating is too subjective in todays cost conscious culture and more quantified and justified estimates are required [10, 11]. For detailed estimates, cost is based upon the number of operations, time per operation, labour cost, material cost and overhead costs. Much of the information in a detailed estimate is based upon the internal synthetics (times or costs based upon expected rates of work for any particular task) of the company. To generate these estimates, it is necessary to have an understanding of the product, the methods of manufacture/process and relationships between processes. Detailed estimating goes through several iterations, since feedback from the relevant departments enables the estimates to be reviewed and improved. Thus, detailed estimating can be achieved only when a product is well defined and understood. Activity based costing (ABC) is a process for measuring the cost of the activities of an organisation [12, 13]. It is a quantitative technique used to measure the cost and performance of activities e.g. inspection, production processes and administration. Each activity within an organisation is first identified and then an average cost is associated. Once this is achieved it is then possible to estimate the amount of activity a product is likely to need and then associate the relative costs. This makes ABC appealing, since it combines estimates with hard data. This method follows similar processes to detailed estimating, and also requires a detailed understanding of the product definition. Thus, both detailed and ABC techniques are not useful during the conceptual phase of project development. In order to estimate a project during this stage other approaches are required which are discussed below. 4.2.

the formula to predict the cost of a future aircraft based on its weight alone. Within the field of cost estimating this relationship is known as a cost estimating relationship (CER).
MASS vs. COST COST = 6.0422 + 1.1591 * MASS Correlation: r = .97161
38

32

COST

26

20

14

8 2 6 10 14 18 22 26 30

MASS

Figure 2: Simple linear equation This is a rather simplistic illustration describing the main principals of parametric estimating. Nonetheless, variations of this approach are a widely used method within industry to predict the cost of a product under development and throughout the life cycle. As CERs become more complex involving several variables, more complex mathematical equations are used to describe the relationships. When CERs become too complex for mathematical equations to solve, cost algorithms are developed [3]. 4.2.1. Using parametric estimating

Parametric estimating

A widely used method for estimating product cost at the early stages of development is known as parametric estimating (PE). To illustrate this concept more clearly the following example will suffice. Typically, for aircraft development, mass relates to the cost of production. That is, as the weight of the aircraft increases, so does the cost of producing it. Whats more, this particular relationship is often described as linear, as illustrated in Figure 2 below. In this hypothetical example the points of the graph represent the relationship of cost to mass for different aircraft. The line traversing the points represents a linear relationship i.e. as the mass increases so does the cost. Using relatively simple algebra it is possible to derive a formula to determine a mathematical relationship for cost to mass. For the above graph the equation, y = ax + b is used to describe the line of best fit between the points. With the relationship described it is then possible to use

Parametric estimating can be used throughout the product life cycle. However, it is mainly used during the early stages of development and for trade studies e.g. within design to cost (DTC) analyses (see Section 5.2). Both industry and Government accept the techniques. Many authors commend its usefulness [2, 3, 5, 6]. However, PE does have its downsides, for example, CERs are sometimes too simplistic to forecast costs. Furthermore, PE is primarily based on statistical assumptions concerning the cost driver relationships to cost, and estimators should not completely rely upon statistical analysis techniques. Hypotheses, common sense and engineering knowledge should come first, and then the relationship should be tested with statistical analysis. Most CER literature describes the process for estimating quantitative issues but not qualitative/judgmental issues. Cranfield University is currently researching this area and early work demonstrates the validity of this innovative approach [10, 11]. In summary parametric estimating is an excellent predictor of cost when procedures are followed, data is

meaningful and accurate, and assumptions are clearly identified and carefully documented. A relatively new form of PE is that of feature based costing. This has become popular due to the rise and sophistication of CAD tools. The implications of FBC are discussed below.

4.3.1.

FBC Issues

4.3. Feature Based Costing

The growth of CADCAM technology and that of 3D modelling tools have largely influenced the development of feature based costing (FBC). Researchers are investigating the integration of design, process planning and manufacturing for cost engineering purposes using a feature based modelling approach [14, 15, 16, 17]. FBC has not yet been fully established or developed with respect to cost engineering. Nonetheless, there are several good reasons for examining the use of features as a basis for costing during the design phase. Products can essentially be described as a number of associated features i.e. holes, flat faces, edges, folds etc (see Figure 3). It follows that each product feature has cost implications during production, since the more features a product has the more manufacturing and planning it will require [18]. Therefore, choices regarding the inclusion or omission of a feature impact the downstream costs of a part, and eventually the life cycle costs of the product [19].
Flange Joggle Corner Fillet Hole

Although feature based costing is gaining popularity, there are limitations for using them for the costing process. There is no widely accepted consensus on what a feature is across the disciplines of an organisation. This problem is magnified when viewed across companies and industries. With respect to this problem, companies are faced with producing their own feature definitions. Table 1 shows an example of how one cost engineering group, categorised features for the purpose of costing [4]. Feature type Examples
Geometric Attribute Physical Process Assembly Activity Length, Width, Depth, Perimeter, Volume, Area. Tolerance, Finish, Density, Mass, Material, composition. Hole, Pocket, Skin, Core, PC Board, Cable, Spar, Wing. Drill, Lay, Weld, Machine, Form, Chemi-mill, SPF. Interconnect, Insert, Align, Engage, Attach. Design Engineering, Structural Analysis, Quality assurance.

Table 1: Examples of features Table 1 illustrates one level of feature definition; however, there are several levels of features definitions. For example, a feature of an aircraft could be a wing, yet this wing contains many parts, each of which consists of many lower level features. Therefore companies are also left to decide how to cope with the changing product definition and applying an appropriate feature based CER. Thus, the feature based costing approach is not yet fully established and the implications are not yet completely understood. Nonetheless, companies find the concept appealing. Other recent developments within the cost estimating community concern the use of artificial intelligence. The implications of which are discussed below.

Pocket Flange Hole Slot Pocket

Slotted hole

Outer contour Bend Inner contour

4.4. Neural network based cost estimation

Neural networks (NNs) and fuzzy logic present the next generation in computerising the human thought processes [20]. Many researchers and practitioners are fast developing and investigating the use of artificial intelligence (AI) systems and applying them to cost estimating situations [21, 22, 23]. For cost estimating purposes, the basic idea of using NNs is to make a computer program learn the effect of product-related attributes to cost. That is, to provide data to a computer so that it can learn which product attributes mostly influence the final cost. This is achieved by training the system with data from past case examples. The NN then approximates the functional relationship between the attribute values and the cost during the training. Once trained, the attribute values of a product under development are supplied to the network, which

Figure 3: Examples of different views on features Other reasons for using FBC are that the same features appear in many different parts and products; therefore, the basic cost information prepared for a class of features can be used comparatively often. Furthermore, manufacturers will have numerous past geometric data that can be related to features. Another reason developers explore whether costs should be assigned to individual design features is that it would provide the designer with a tool to visualise the relation between costs, and aspects of the design that s/he can influence in real time as the product is developed. Furthermore, it is possible engineering intent can be encapsulated within features such as, product functionality, performance, manufacturing processes, and behaviour characteristics.

applies the approximated function obtained from the training data and computes a prospective cost. Recent work has demonstrated that neural networks produce better-cost predictions than conventional regression costing methods if a number of conditions are adhered to [21]. However, in cases where an appropriate CER can be identified, regression models have significant advantages in terms of accuracy, variability, model creation and model examination [22]. 4.4.1. Uses

4.5. Case based reasoning

Analogy makes use of the similarity of products. The implicit assumption is that similar products have similar costs. By comparing products and adjusting for differences it is possible to achieve a valid and useable estimate. The method requires the means of both identifying the similarity and differences of items. This can be through the use of experience or databases of historical products. A more modern approach to the analogy method is case-based reasoning. Case-Based Reasoning (CBR) can also be classed as a form of artificial intelligence since it can be used to model, store, and re-use historical data, and capture knowledge for problem-solving tasks. An important feature of CBR is the ability to learn from past cases/situations. A CBR system stores and organises past situations, then chooses situations similar to the problem at hand and adapts a solution based on the previous cases. An overview of the CBR process is illustrated in Figure 4.
Problem New Case Retrieve Learning Confirmed Solution Tested Case Store Previous Cases Knowledge Base Adapted Solution Suggested Solution New Case Retrieved Case(s) Similarity

The neural network does not decrease any of the difficulties associated with preliminary activities when using statistical parametric methods, nor does it create any new ones. The analyst is still left with a choice of cost drivers and must make a commitment to collecting specific cost data before analysis can begin. Models can be developed and used for estimating all stages of a product life cycle provided the data is available for training. A great advantage that a neural network has compared to parametric costing is that it is able to detect hidden relationships among data. Therefore, the estimator does not need to provide or discern the assumptions of a product to cost relationship, which simplifies the process of developing the final equation [23]. 4.4.2. Issues

Neural networks require a large case base in order to be effective, which would not suit industries that produce limited product ranges. In addition, the case base needs to be comprised of similar products, and new products need to be of a similar nature, in order for the cost estimate to be effective. Thus, neural networks cannot cope easily with novelty or innovation. With regression analysis one can argue logically and audit trail the development of the cost estimate. This is because the analyst creates a CER equation that is based on common sense and logic. When considering neural networks, the resultant equation does not appear logical even if one were to extract it by examining the weights, architecture, and nodal transfer functions that were associated with the final trained model. The artificial neural network truly becomes a black box CER. This is no good if customers require a detailed list of the reasons and assumptions behind the cost estimate. The black box CER also limits the use of risk analysis tools, which as discussed below, is a prime benefit of parametric estimating. A final estimating technique to discuss is the analogous method and more particularly that of case based reasoning.

Revise Verification

Reuse Adaptation

Figure 4: Case based reasoning process [24] As with FBC, CBR relies on a feature description base. As previously explained this is not a straightforward task. Furthermore, CBR requires a number of past cases in order to be effective. In a highly innovative company past cases may not be available so will therefore reduce the effectiveness of the CBR system. Companies that use analogy estimates regularly may find CBR a more robust useful method. Section four has described the main estimating techniques and their related issues and promotes a broad understanding of both traditional and state-of-the-art techniques. The next section describes and highlights the main techniques available for managing and reducing costs in order to achieve the target of an early estimate.

5. Cost management and cost reduction

5.1. Value analysis and value engineering

Although similar to each other these techniques serve different purposes. Value analysis (VA) is concerned with the analysis of a product with respect to reducing product/process costs. Typically, VA is a technique used on existing items/products in light of new processes, materials or assembly methods being available. Value engineering (VE) on the other hand is an approach that rigorously examines the relationship between a product function and cost and can be used during the concept stage. VE identifies the functions that are beneficial to the customer so that the value of a product is not just perceived as a low cost product, but rather one that satisfies the customer. This technique was used widely within the aerospace industry up until the 1970s. However, with the introduction of tighter defence budgets, a more stringent technique was required for ensuring cost targets were achieved and design to cost was introduced.

It is the cost engineers who are responsible for bringing back, to the early stages of product development, enough information on cost that will enable the designer to use it for decision-making. They develop algorithms that designers can use to monitor the impact of their decisions as they proceed with their design [4]. In addition, they are responsible for updating and maintaining the validity of any algorithms used [26]. The tools to assist the designer in meeting and verifying cost goals are in most cases developed within the context of a specific industry or company [27]. One European aerospace manufacturer uses a computer tool called Cost Advantage [4]. However, it should be stated, the results produced from using such a tool are only as valid as the data that has been collated, normalised and input. Both VA/VE and DTC help to manage the risk of failing to meet the required cost targets; however, they are not focused on risk as a main project objective. Therefore, the next section discusses risk management and its role within todays estimating community.

5.2. Design to cost

The objective with design to cost (DTC) is to make the design converge to an acceptable cost, rather than to let the cost converge to design. DTC activities, during the conceptual and early design stages, are one of determining the trade-offs between cost and performance for each of the concept alternatives. DTC can produce massive savings on product cost before production begins. The general approach is to set a cost goal, then allocate the goal to the elements of the product. Designers must then confine their approaches to that set of alternatives that satisfy the cost constraint [25]. However, this is only possible once cost engineers have developed a tool set that designers can use to determine the impact of their decisions as they make them. Figure 5 illustrates an example of the types of input required for producing a DTC tool.
Production standards Part features / geometry Feature attributes Planned process Material / BO details Material costs Labour rates O U T P U T S Cost by part, assembly, material, etc. Design guidance Inputs to risk Producibility guidance

5.3. Risk Management

Because estimating is based on assumptions concerning the likely cost of an as yet unknown product outcome, there is an increasing trend to combine the statistical techniques of parametric cost analysis with statistical risk analysis methods. Parametric estimating, because of its statistical approach, offers the cost analyst the advantage of being able to quantify the risk of an estimate. The introduction of risk assessment and risk analysis ensures that the consequences of risks are understood and taken into account throughout the project life cycle [28]. Furthermore, risk management ensures that the goals of the producer and consumer materialise and that they both benefit. It provides confidence concerning final costs and identifies actions needed to keep cost and schedule on target. There are five key steps to follow in the risk management process [29]. Figure 6 illustrates this process more clearly. One of the most important benefits of using risk assessment is to generate a distribution/range of costs i.e. to move away from single point estimating, since a range of costs are much easier to estimate than a single cost [30]. Furthermore, once a risk analysis has been conducted the analyst can consider ways to reduce the risk e.g. by avoidance, deflection or contingency and then plan accordingly to control the reduction process. Risk management along with VA/VE and DTC can be better utilised by combining them into a state-of-the-art cost management framework known as target costing.

I COMMERCIAL FACTORS N P Cost Algorithms U T S RULES Design rules Producibility rules

Process decision models

Figure 5: DTC model

Identify Risks Assess Risks Analyse Risks Reduce Risks

Feedback

above techniques and also provides a matrix to assist with the planning and application of a particular technique throughout the product life cycle.

6. State-of-the-art-practices
Control Risks Seven high technology concurrent-engineering companies were interviewed as part of recent work carried out by Cranfield University [32]. The analysis was conducted within three main areas: the use of CER's, general costing, and the types of computing tools adopted. Only a few of the companies had developed CERs for the manufacturing processes. These were either developed using computer tools or using the experience of highly skilled cost engineers. There seemed to be a lack of formal validation procedures for the CERs and no type of documentation seemed to be in place. There was generally no formal approach for costing the conceptual or detail design stage. Companies that did attempt these estimates seemed to rely mostly on expert knowledge with regards to past data, which is fraught with subjectivity. Non of the companies had CERs to predict their design activities. For general costing analysis there was a tendency for companies to use a computer-based tool at the detailed manufacturing cost estimation level. The results produced from these analyses seemed to be fairly accurate. Most companies could validate this through feedback from production. Overall it was found cost benefit analysis was not being conducted. However, the companies did review their costing processes regularly, although there were no costing standards used as guidelines for this process. A variety of costing software was used for both high level and detailed costing, and there was a mix of the level of integration with other business systems. Examples of the tools used included KAPES, PRICE (H), TIMSET and specifically developed in-house systems.

Figure 6: Risk Management Process

5.4. Target costing

Target costing (TC) is a cost management concept that is well suited for use within a concurrent engineering environment. It has mostly been used within the automotive industry as a means of strategically managing cost. TC provides a framework that places cost management issues into the forefront from the early phases of product development and can be used throughout all phases of a product life cycle. However, it is mostly practised during the design and development stages where most of the decisions that impact life cycle cost are made [31]. TC is a framework in which estimating becomes an integrated element. It combines the concepts from existing cost management and cost estimating/engineering tools e.g. VA/VE, DTC, risk management, and bases its philosophy on the logic and benefits of activity based costing. 5.3.1. Unresolved TC Issues

TC is not suited to all industries. It is best used on new products, which characterise small incremental development changes from past similar products. The concept falls down when addressing the cost estimation of innovative products. Chiefly because, the process requires a breakdown of how the components of a product will effect the functionality of an, as yet, undefined product, and furthermore, what the cost of each product feature or component will cost in relation to whole product. This is not possible unless some sort of system has been developed that has the capability of producing a detailed product definition/breakdown during these early stages. Therefore, it is not as yet, widely used for companies that develop highly innovative products. This concludes the discussion concerning available tools for estimating within a concurrent environment. Both the advantages and limitations of current and future estimating techniques have been summarised. The remainder of the paper discusses how industry uses the

6.1 The challenges faced manufacturing industry

by

European

The snapshot view highlighted that the application of CERs within industry was not widely practised, and those that did use them did so badly. Companies could greatly enhance CER effectiveness and use by examining their procedures and methodologies for creating them. The application of CERs for the design process was one not even considered by the above companies. This was one of the underlying reasons that Cranfield University devised a methodology to take account of both the quantitative and qualitative issues of designing, and developed a CER methodology for costing the design process [10, 11].

The use of features, artificial intelligence and case based reasoning techniques were not used within any of the companies visited. And as mentioned earlier, few of them had adjusted their costing practices after the adoption of IPT or concurrent engineering practices. Few companies had completed a benefits analysis on the costing function. In summary, there appeared to be a general lack of planning and order to the estimating process. In view of cost becoming an ever-increasing concern cost estimating and management needs a better focus. Companies considering the adoption of a concurrent engineering philosophy should use the opportunity to re-examine current practises and evaluate the possibility of adopting some of the more recent developments within the field of cost estimating and engineering. Benchmarking the leaders can also assist this process.

6.2. Benchmark the leaders

In cost estimating and cost engineering the USA leads the way in both practice and development [3, 33]. In Europe the European Space Agency (ESA) actively promotes the sharing of estimating best practices [34]. One leading European aerospace manufacturer is currently examining the feasibility of developing a seamless cost-estimating environment. Their early development plans and intentions are to adopt a feature based costing approach [4]. The company embraced the philosophy of an IPD approach and has demonstrated a strong commitment towards concurrent engineering. They have invested extensively into digital product assembly
Project Concept

methods and information management systems, which are used to discharge information in line with their concurrent engineering process development. The emergence of the new IPD processes rendered their existing parametric estimating algorithms out of date, particularly for the design process. They seized this opportunity to embrace and integrate new estimating processes. They recognised the potential of providing nonspecialist cost estimators (design engineers) with a computer tool to inform them about the costs incurred with particular design approaches; in real time. This capability would empower non-cost specialists to make decisions related to cost improvements as they designed the product. This potential was realised due to the advent of 3D CAD modelling systems, which store information, related to features throughout the product hierarchy. The idea of the process is to capture features from the CAD modelling tools, which can then be integrated to a design for manufacture (DFM) expert system that can price the cost of a design in real time. The DFM tool under evaluation is called cost advantage. It can accept part geometry directly from feature based modelling tools such as Pro-E and Unigraphics. It can be populated with design and manufacturing knowledge in the form of producibility algorithms so that it can evaluate a design based on the features, materials, and manufacturability. This then empowers the designer to make decisions related to cost as s/he worked. Figure 7 illustrates a high level concept of the companies intent to integrate their cost modelling capabilities using a feature based approach throughout the concurrent engineering phases.
In Service

IPD PROCESS
PRODUCT FEATURES / COST DRIVERS PRODUCT FEATURES / COST DRIVERS

(LEVEL 1) (LEVEL 2)

DETAILED COST ESTIMATION

PARAMETRIC COST ESTIMATION

(LEVEL 3)

COST DATABASE

Support to other Cost/Business systems Figure 7: Integrated cost modelling

Companies wishing to use this approach would need a complete set of computerised tools that interface with each other. An obvious drawback for companies that may want to follow such an approach is the requirement for a comprehensive suit of expensive computerised tools. However, as computing power increases these tools become available and accessible for other industries to use. This development work may provide future estimators with an almost seamless system that can be used throughout the product lifecycle.

7. Matrix
Table 2 summarises where and when each of the techniques and processes discussed in this paper are best used throughout a product lifecycle. The matrix shows that as a product moves through development the estimating processes need to change. The table suggests hard breaks between where one technique should be used against another. However, it should be borne in mind that parametric estimating (PE), neural networks (NN), and case based reasoning (CBR) could be used during later project phases, whereas ABC and detailed cost estimating cannot be used during the earlier product phases. Target costing (TC) is shown as useful throughout the product lifecycle, however, this is only possible when other estimating techniques and tools are integrated into the TC framework. Neural networks are not deemed suitable in the concept phase of innovative products since the estimates they produce are of a black box nature. That is, they do not provide a facility to demonstrate the assumptions and reasoning behind the final estimate.

techniques and processes, used to facilitate cost estimating, have been discussed with particular reference to their applicability within a concurrent engineering environment. This provided a broad overview of the strengths and weaknesses of each method. A snapshot view of several leading concurrent engineering companies was provided, which demonstrated the general lack of formal, organised processes to the estimating function. One leading European aerospace company was discussed with particular reference to their efforts at utilising and advancing the cost estimating process. And finally a matrix was provided that details where each of the discussed estimating processes should be used throughout the product life cycle. In conclusion, there are a wide variety of emerging techniques available that companies can utilise to improve their cost estimating and management processes. Artificial intelligence will play an increasingly important role within the estimating communities. Because cost has become such an influential factor cost estimators and engineers should be aware of these technologies so that they can utilise them to improve their cost management processes. Although only a snapshot view of several companies was conducted a general observation was the lack of formal, disciplined approaches to the estimating process. Companies that want to continue succeeding and winning contracts will need to become more efficient and proficient at estimating their new developments. In a world of rapid change, increasing competition both local and global, the winners will be those that can confidently predict and successfully manage the cost of their developments. The tools are available lets start using them!

Acknowledgements
The authors would like to thank Geoff Tuer for his input and guidance to the work of this paper. This work has been performed within the research project The integration of quantitative and qualitative knowledge for cost modelling. BAE SYSTEMS and EPSRC (Engineering and Physical Sciences Research Council) are joint sponsors. The work is jointly developed and supervised by BAE SYSTEMS and Cranfield University.

Table 2: Estimating process matrix

References 8. Summary and Conclusions

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