Business Challenges
Efficiently managing the cost of product development, from initial concept to manufacturing is crucial. Many companies capture and manage these costs in siloed and disconnected systems. Often, cost data is not integrated within the product data which leads to ineffective collaboration and poor visibility.
The lack of integration makes it challenging to continuously update cost values in line with modifications throughout the product development lifecycle. It becomes tedious and cumbersome to keep pace with such modifications.
Also, there are often no means to assess the impact of the future risks or opportunities on product development costs. Such as in the case of an increase in overall cost of product development due to supplier contract renewal in the future.
Overview of the ENOVIA Cost Management Process
ENOVIA Cost Management solutions allow you to capture cost data on the Logical, Engineering and Manufacturing Items. You can set-up cost for both non-configured & configured product structures. For the non-configured product structure, you can only set-up nominal costs, while for the configured product structure, you can setup the following two types of costs:
- Nominal Cost: This is a common cost of an item that remains the same in any product configuration it is being used in.
- Configuration-Specific Cost: This represents a more precise cost, specific to a certain product configuration. This is useful when certain cost, for example Assembly Cost or Installation Cost of a product, varies based on the specific product configuration.
The following image displays a simplified view of the ENOVIA cost management process, roles, applications, and potential users involved in the process:
Note: The Cost Manager (CTR-OC) role also includes the Business Value Definition & Cost Assessment apps. The Cost Specialist (CTT-OC) role also includes the Cost Assessment app.
1) Set Cost Target
You can set-up cost objectives for your products at the start of your product development process.
This is essential to assess how well your objectives align with actual cost values during the product development process.
To do that, you can open your product structure in the app and setup cost targets. You can setup cost target for all the levels in the product structure. The allocation column indicates how much of the allotted cost for the parent item has been used by its child items.
While defining the cost target, you need to select a specific: currency, cost objective & its limits.
You can leverage lifecycle states to indicate the maturity of the cost. Cost targets can also be revised to manage cost evolution over the time.
For each engineering item, you can set-up various direct and indirect costs.
The direct cost refers to a recurring cost to produce one unit of the product. For example, Labor Cost involved in machining of the part, Raw Material cost of the part.
The indirect cost refers to the one-time, non-recurring cost related to product development. For example, purchase of Facilities (Building, Equipment) and Tools for product development. Non-recurring costs can be defined for an item in the context of a project.
2) Set Cost Values
You can specify cost value for all the cost categories selected during the cost target definition. While doing this, you can specify its Kind (Type) to indicate whether it is an actual value or an estimated value. You can also mention how much confidence you have while specifying the cost value and use other cost attributes such as comments to add more details and explanation.
3) Define Anticipation Events
To assess the impact of the future risks or opportunities on product development costs, you can define anticipation events.
For each item in your product structure, you can select the type of event and specify its date and its impact on the cost value.
An example of such an event would be: increase in product development cost due to supplier contract renewal. In such a case, you can create a Risk event and specify the increased cost value and the anticipated date of the contract renewal.
4) Review Analytics
You can evaluate cost performance to assess how well your Cost Targets are aligned with the Cost Values.
To do that, you can open your product structure in the Cost Assessment app. To perform cost assessment for each item within your product structure, refer to the icon before the cost value that indicates the status of cost alignment for the given item.
The following image displays Multi-list View with the Direct Labor Cost assessment for the entire product structure. If required, you can configure the column view to add more cost categories in the table.
Note: You can click & open a specific product within the structure and view its cost analytics separately in a sperate tab.
You can also refer to the “Hierarchy View” that lists all the cost categories within Recurring & Non-Recurring cost taxonomies along with their cost performance.
You can click on any category and view its dedicated analytics which involves Cost Overview, Structural Distribution to identify highest contributing parts, and parts that are reaching targeted cost.
The Timeline View allows you to perform cost forecasting by assessing the impact of the future risks or opportunities on product development costs. This is derived based on the anticipation events with their timelines defined for the product.
In the next blog (Part 2), we will dive deeper into each step along with a demo video.
