3803_strategic product development_asug v4
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Orange County Convention Center Orlando, Florida | June 3-5, 2014
Strategic Product Development and Cost Estimates for Futuristic Products Vedant Borse (HCL AXON)
Understand Product Costing and Challenges with estimating cost of Future Product
Eliminate Manual/ Excel based calculations and reduces the risk of estimation variance
Closed loop Solution Approach for accurate Product Costing, Planning and Execution
LEARNING POINTS
How do I estimate Cost?
Detailed Level Estimates BOM with Detailed Part List
•Travel •Freight •Contract
•Labor •Vehicle •Parts •Test Cost Manpower
+
Executive Advance Planning Departments/ Project
- 6Years - 4Years - 3Years
High Level #1 Estimates Buildable Combinations Matrix (BCM)
•Travel •Freight •Contract
•Labor •Vehicle •Parts •Test Cost Manpower
+
• Development Complexity Known • Feature List Unknown • Parts List Unknown
High Level #2 Estimates Features and Parts List (High Level)
Features List
•Travel •Freight •Contract
•Labor •Vehicle •Parts •Test Cost Manpower
+
• Feature List Known • Parts List Partial • Development Complexity Calculated
• Parts List Known • Feature List Known • Development Complexity Calculated
Reduce Estimation Accuracy to: +/- 5%
Reduce Estimation Accuracy to: +/- 0.5%
Challenge 1: Varying YoY Cost Estimates
-10%
-5%
0%
5%
10%
15%
20%
0
50
100
150
200
250
300
Year 6 Year 5 Year 4 Year 3 Year 2 Year 1 Actual
Cost
Variance
Cause Development Assumption Not Clear in Early Stage Estimator include Buffer in budget Detail Spending Is not clear
Sample Lifetime Cost History for a Single Vehicle Development Estimates
Variance
~20% Variance
Year on Year Estimation Est. Vs Actual
~5% Var.
Challenge 2: High Consolidated Variance
(80.00)
(60.00)
(40.00)
(20.00)
-
20.00
40.00
60.00
Year 6 Year 5 Year 4 Year 3 Year 2 Year 1 Actual
Product F
Product E
Product D
Product C
Product B
Product A
Total Variance
Issues Poor Estimation Accuracy occurs in all projects. Poor Spending Control occurs in all projects.
Year on Year Estimation Est. Vs Actual
Actual
No Part List/ BOM data results in to estimate cost Long estimation process Varying range of complexities, type of development, its flow, duration, etc leads
to hundreds of permutation and combination to estimate a product cost for Labor, Parts, Products, Design, Build, Test, Prototype Cost, Whitebody, etc.
Unclear varying factors forces use of weak resource estimates technique resulting in Inaccuracy in Project Resource Planning for future Products (Eg. 20% avg. variance/Prj )
Shorter time to market and increasing variant launch (Minor Model, Major Model, NPDI) adds to more pressure on estimates and product development, resulting in incorrect estimates
Use of custom tools or Excels adds difficulty in collating estimates from multiple business units
Unavailability of robust estimation technique limits alternatives/ estimates scenarios (Eg. 3/Prj), thus Limiting alternatives/ estimates scenarios for Lineup Planning of multiple vehicle and multiple launch years projects
Future Product Cost Estimates Challenges
Microsoft Excel
Custom Home Grown Solution MS Access Highly customized PLM Solution
Guestimates/ Person Dependent
Current Estimation Tools
Varying Year on Year costing estimates results in Bad Image to investor
More reporting requests, thus requiring large pool of planning resources required for estimation and report preparation
Inability to created multiple estimates scenarios for each vehicle, while creating single lineup for all vehicles across globe for each variant becomes distant possibility
Consequence
HCL AXON PLM Practice
• Resource expertise in SAP PLM
PLM Highlight: Leader in SAP PLM Implementation (12+ years practice, 40+ implementation) HCL AXON has amongst the highest number of PLM client references SAP PLM/PPM Practice COE’s in US, Asia and Europe
Unique Industry Specialization: Pharmaceuticals, Consumer Healthcare, Consumer Packaged Goods, Discrete Manufacturing and Professional Services. Delivered the
largest PPM user in Pharma and the most complex project in CPG
Platform Pioneer Developed an accelerator for PLM/PPM in Consumer Healthcare First SAP partner globally for the Rapid Deployment Solution (RDS) of Portfolio and Project Management (SAP PPM) SAP partner globally for the Rapid Deployment Solution (RDS) for Visual Enterprise (VE) SAP Ramp up Partner with dedicated SAP PLM Lab (PPM 6.0, PLM 7.0)
SAP Endorsement Co-authored R&D whitepapers with SAP More Sapphire conference success stories than any other partner Top collaborator with SAP for PLM in Life Sciences
Manufacturers pursuing integrated PLM/MES/ERP environments in HCL's primary industries - particularly those with SAP as their ERP platform - should consider HCL for PLM services.
“
Solution options Easy Cost Planning PDCE iPPE BOBJ PCM
Criteria No Material Master, varying range of complexities, type of development, its
flow, duration, Show possible permutation and combination Calculate 2.5 Billion data combination and generate results for
Cost: Labor, Parts, Products, Design, Build, Test, Prototype Cost, etc.
Quantity: Manpower, Products, BOM/MM, etc
Solution Options
Combination of Process improvement with enablement via right technology should be the mantra
Build a closed loop estimation process
Closed loop Solution: SAP PPM+PCM+ECC
f(x)
Approval Workflow
PCM Profitability & Cost Management
PPM Portfolio & Project Management
Project Execution
Financial Time Reporting
Features and Parts
Project System
Project Highlights
First PPM-PCM Integration First Unified UI Integration First PCM-BODS-PCM Real-
time Integration
Automotive Estimation formulas are very complex They involve varying parameters
Type of development (Minor Model, Major Model Change MMC), Full Model (FMC) or New Product (NPDI))
Varying range of complexities (Carryover, Modify, New) Build Lot (Stages of Development) and duration Development flow Departments (Body, chassis, Interior, Electrical, Transmission, etc
While estimating the process Crash test vehicles has further complex dimension
Every Company has a complex formula for estimation N_Motor CFM: Common Module Family F_Motor BCM: Buildable Combinations Matrix T and Y Motor has similar methods
Define Formula
BOBJ-PCM Formula and Lookup
Super User can control Formula Tables, Condition to
apply specific Table, Structure of Table and Formula
Build Estimation Projects Extent Project for Next Levels of Estimation Extent Estimation Project to Execution Project Variance Analysis between estimates and Actuals to
improve the formula via a Closed Loop process (PCM-PPM-ECC Integration)
Build a Lineup view of all the projects stacked together
Define Project and Lineup
Project Planning and Estimation Inputs
Calculation in PCM
Underlying Calculation in PCM from inputs from PPM
Rollup Estimation to Project and Lineup
Lineup Summarization
SAP Implementation (Old vs New) N
ew S
yste
m (S
AP
) O
ld S
yste
m (M
anua
l)
Resource Estimation and Formula
Project Resource Estimation
Lineup Scenario Resource Simulation
Financial
Manual Process
Project Estimates
Project Lineup
f(x)
Approval Workflow
PCM Profitability & Cost Management
PPM Portfolio & Project Management
Project System
Project Execution
Financial Time Reporting TTP Project
Benefits -Improved Accuracy from 20% to 5% due to formula PDCA -Best Decision Making due to Alternatives: 3 scenarios to10 scenarios - Huge Annual Saving in terms of Estimation House and Cost
Issues: -Manual Repeat process -Low Accuracy -More Efforts
Timesheet
Calculation via spreadsheets
Calculation via spreadsheets
Parts System
Parts System
High Efforts/ yrs for Estimation
Lower Simulation/ Project
High Efforts/ Project for Estimation
Higher Simulation/ Project
Lower Efforts/ Project for Estimation
Better Planning decisions, by providing: More accurate estimates. Accuracy improvement from 20% avg./Prj → 5% avg./Prj
(If condition change, clear analysis reasons) More lineup alternatives. Increase Alternatives from: 3 scenarios→10 scenarios
Time Saving
Forecasters time: 130hrs/Prj→10hrs/Project (About $0.4M Saving)
Benefits
THANK YOU
THANK YOU FOR PARTICIPATING
Vedant Borse Solution Architect, PLM / PPM / PCM
HCL AXON EAS Division – HCL Technologies
15 Exchange Place, Suite 730, Jersey City, NJ 07302 Mob: +1 919 744 6166
www.hcl-axon.com www.hcltech.com
www.hcl.com
HCL Booth #213