What does Predictive mean?
Information is most valuable at the point at which it can guide and influence our decisions in business. Until recently, people in product development have had very little information on how their design, manufacturing planning, and sourcing decisions affect cost. What little information that was available almost always came from the historical accounting system and was for past products. This information is only useful if all your future products and the environment in which you manufacture them will be exactly like the past. It’s like developing, planning, and sourcing a product when you only can look in the rear view mirror.
However, we need to look forward for several reasons. First, as the left side of the figure below shows, most of the costs of a product are committed very early in the development cycle. However, they are not actually realized until much closer to production. In fact, we have learned from many customers that historical accounting costs are not even able to be stably calculated until one or two quarters after product launch. Second, as the right side of the figure shows, the cost to the organization (SG&A) of making a change that reduces product cost (COGS) goes up exponentially, the later this change is made in the product development cycle. Moreover, in many situations, the opportunity for reducing product cost is severely reduced once the product is in production. Just like quality, vibration, performance, and many other product attributes, if cost it not aggressively addressed in the fundamental design and manufacturing processes of the product, it is impossible to address later.
Therefore, aPriori has designed its Product Cost Management platform to provide cost predictively, before the part is in production. aPriori provides cost to the user continuously and provides it when he is making the very decisions that will determine the product’s cost in production.
How does aPriori provide a predictive cost assessment?
aPriori is specifically designed to evaluate the impact of most common and powerful decisions that affect product cost.
- Direct link to product design - aPriori is directly linked to the solid model of the parts and assemblies that constitute the product through the CAD system. aPriori can assess the Geometric Cost Drivers of the model in real-time to assess the cost of the design. As the designer actively designs and re-designs, aPriori reacts every change the affects product cost and provides a new cost for the new design. The designer never has to leave his native CAD environment, but sees cost responsively change in the aPriori Cost Ticker.
- Responds to material specifications – In addition to the geometry of the design, aPriori is able to read the part’s material specification automatically from the CAD system and allows users to specify material in aPriori, as well. aPriori calculates utilization, mass of material required to make the part, and the cost of material per part with every change in geometry and material composition, form, and size.
- Provides a manufacturing plan and allows exploration – The product geometry and material specification are only one part of product cost. Once a facility is selected to make and assemble a product, there may be a variety of ways to manufacture the product. aPriori suggests the lowest cost way to manufacture the product and then allows the manufacturing planner to override or specify every routing, process, operation, tool, and set-up required. With every new override or specification, aPriori reacts to provide a predictive cost of that manufacturing plan.
- Shows the impact of sourcing strategy – The procurement professional also needs to know what the cost impact of his sourcing strategy is predictively. Therefore, aPriori’s platform can contain every internal customer factory, as well as every supplier. The buyer may cost the part, assembly, or product at any supplier that has a Virtual Production Environment in aPriori. Predictively knowing the 'should-cost' of the product using a supplier’s unique manufacturing capabilities and cost structure is as easy as selecting the supplier from a pull-down menu.
Why is knowing cost predictively so important?
- Reduce your Product Cost (COGS) – as described above, the most effective way to control and reduce your product cost is to know the impact of your design, manufacturing planning, and sourcing decisions when you are making these decisions – not months or years later when the product is in production.
- Always Launch New Products at or Below Target Cost - by providing each of your engineers with a capability that enables them to always understand the cost implications of each and every design decision they make as a new product evolves into its final form, fit and function, they will never inadvertantly make a decision that results in a product that releases to manufacturing over its target cost.
- Gain the ability to do a precise make/buy decision – aPriori’s ability to predictively assess the impact of manufacturing at one factory versus another enables the user to intelligently explore making the product at an internal facility versus outsourcing among numerous suppliers.
- Make your supplier negotiation fact-based – When you have predictive assessment of the True Economic Cost of a part, assembly, or product, your negotiation with suppliers changes. Instead of confusion on both sides about what a good or bad deal for both parties is, everyone plainly knows the should-cost of the product. Then the customer and supplier can openly arrive at a fair profit for both sides.