From Evaluating Cost Engineering Solutions to Building a Global Costing Methodology
I was an aPriori customer before I joined the team at aPriori four months ago. Now that I am part of the company, my experience as a customer will quickly become discounted going forward. My future conversations may have folks wondering “is he just saying what I want to hear?” It’s for that reason that I felt documenting my experience now while I am still fresh off “customer mode” would give a lasting impression for others to reference.
The following article is a summary of my experience as a customer of aPriori’s. I worked for a Fortune 500, multi-national manufacturer of consumer durable goods. This is my journey evaluating cost solutions, building out and implementing a global costing methodology, the challenges we faced, the results we enjoyed, and ultimately, the benefits we experienced.
The Company’s Historical Perspective Regarding Cost
We had many methods of cost estimates within the organization – from spreadsheets, to cost sheets, to simulation software, to the standard add/subtract from the last model. Many different voices throughout were consistently inconsistent. As a result, new product introduction investment decisions were not always based on sound data. Projects were rarely cancelled due to cost; and therefore, significant resources from engineering, purchasing, and factory manufacturing were dedicated to cost reduction after a product was launched in the market.
Building Target Cost Management Disciplines
As it became obvious that we needed to get our costs under control, we began with another provider (we did not choose aPriori as our first cost modeling software solution) and built a global team while implementing Target Cost Management disciplines within the organization. This worked for a couple of years, but as the team grew stronger, the weakness of the software determined its demise. The primary issue was that it was a desktop software. Each user was responsible to maintain archives and ensure that reference data was up to date. The integrity of the data was also suspect as users could make changes to standardized values (material, labor, overhead) and without specific investigation, the results could be misconstrued. The key failures were that the modeling process was highly manual, primarily requiring a manufacturing engineer to accurately reflect the proper manufacturing requirements. As a result, there was no consistency in modeling practice. For example, two or more cost engineers could model the same part and generate different assumptions and results. Lastly, since it was a desktop software, there was no central repository which reporting could be generated.
Finding the Ideal Cost Modeling Solution
Thus began the search for a new cost modeling solution which would provide the necessary capability to support our global organization. There were many aspects to the criteria but simply stated the following were must haves:
- Robust Manufacturing Capability
- Enterprise scalability
- Security protocols to differentiate users
- Ability to estimate from both CAD & Physical Part
- Data Warehouse for reporting and data mining
- Database platform for centralized storage
- Currency based on region, local currency. Not just the USD equivalent.
- Repeatable Process to reduce learning curve and drive consistency among users
Having this roadmap, we began to evaluate potential solutions. We evaluated thirteen different solutions and narrowed those down to three, which were selected to provide a “day in the life” simulation. This allowed our team to interact with the software, evaluate its capabilities, and identify the pros and cons of each. This seemed like a logical path but in a large matrix organization, the evaluation process took nearly two years from start to finish before aPriori was selected as the new provider in July 2013.
Why We Chose aPriori
Our reason for selecting aPriori was different than most companies evaluating a software investment. In fact, our approach was confusing for aPriori! Most companies evaluate for cost reduction opportunity – in a sense, building the hard-metric ROI to justify the software acquisition and implementation. Our goal was cost predictability, more specifically to have a high confidence that the cost estimate reflected an actual situation and that variation from estimate to supplier quotation was minimized. As a new organization responsible and viewed as cost experts, we needed a software application that could not only support our team but also add credibility to the output as a byproduct.
Implementing aPriori Globally
Implementing and transitioning the global team to the aPriori software required a balance. The plan was to isolate the transition completely to the software. All existing processes, interactions and output remained unchanged while we began the process. This allowed the team to continue supporting the business without interruption.
Step 1: Training
We had all users, across five global locations, complete eLearning provided by aPriori. For some users this required minimal effort. The super users, however, invested a great deal more time to fully understand the robust functionality of the aPriori suite. These super users were then asked to be part of the “train the trainer” program. Getting 100+ users up and functional in a short time required a collective effort. We did ask aPriori to help support training of our China team, but the majority of effort was internally lead. Documentation and process knowledge was stored on an internal microsite. This quickly began to build content from super users and process documentation provided by aPriori.
Step 2: Configuration
Configuration was occurring as we progressed with training. Configuration is simply defined as tuning the software to obtain the output and results that you expect. We purchased all capabilities offered by aPriori. The manufacturing processes, which we focused the majority of our effort on, was around injection molding and sheet metal; however, we also utilized casting, machining, assembly, other secondary, and surface treatment. aPriori provides full functioning process capability out of the box; however, we tuned the software to represent how our suppliers manufactured parts. For us, this included:
- cycle time adjustments
- available materials and machines
- mechanical and physical attributes
For the other manufacturing processes, we adopted what aPriori provided.
3D CAD Files vs. User Guided Costing
The primary use case for aPriori is based upon having a 3D CAD file to import and read the geometric cost drivers to determine the most cost effective manufacturing method. It is important to know though, that aPriori also has the capability to generate cost estimates from 2D drawings or from a physical part, which they call User Guided Costing. What is unique about this is that users can write the algorithms to create custom processes or industry specific manufacturing processes that have not yet made their way into the default aPriori offering. The cost estimates are usually based upon user inputs such as length, width, height, thickness, or weight. This expands the potential capability of the aPriori system beyond the out of the box offering allowing cost estimates to be created for supplier proprietary designs or evaluation of competitor products all within a single environment. User Guided was critical to our deployment for both use cases.
Step 3: Implement Regional Data Sets
In conjunction with configuration, we implemented seven regional data sets so that every manufacturing capability could generate a cost estimate across all regions where components are sourced. This process began with selecting the core seven required countries from the 67 available regional data libraries that aPriori offers and updates semi-annually. We then customized the materials and machines within those primary process groups discussed earlier. Unique materials approved by the engineering organization and used by suppliers in component production were added including regional variation. Machines were added to ensure representation of supplier manufacturing capability within each region. Both addition activities included not only description and cost but also the chemical and physical characteristics to properly calculate cost and utilization within the aPriori environment.
Step 4: Validation
The second half of configuration was validation – analyzing the output from aPriori and comparing to known data. We took a sizable sample of supplier detail quotes and compared them against aPriori cost estimates. We took all existing knowledge that had been embedded in the prior cost estimation software and transferred into aPriori so that no knowledge was left behind. Algorithms continued to be refined to obtain the desired predictability. We also compared aPriori against the incumbent software to identify opportunities or validate the accuracy of the new solution. All of this activity stimulated the internal confidence but also trained users – giving them not only ability to generate a cost estimate; but to also analyze and understand why or what caused the cost estimate results.
Step 5: Results
Four months after selecting aPriori (November 2013) we converted all 3D CAD based cost estimates to utilize aPriori. The next year was spent developing User Guided Costing algorithms primarily for assemblies but also for core manufacturing processes. This functionality was implemented in October 2014. In December 2014, we decommissioned all prior cost modeling tools and transitioned 100% to aPriori.
How Does aPriori’s Deployment Look at the Company Today?
Fast forward five years…
- Cost estimates are within a +/- 2% variation from supplier quotation. Not only for the core injection molding and sheet metal, but for all manufacturing processes. Constant evaluation and analysis ensures that capability remains aligned with suppliers’ technology.
- Regional libraries (the datasets of material, labor, overheads) expanded from seven countries to sixteen countries.
- Over 800,000 data points are continuously monitored and updated semi-annually.
- User Guided Costing capability development supporting over 100 manufacturing processes enabling the global team significant flexibility to generate cost estimates depending on source of components data.
- Expansion beyond New Product Introduction, into other parts of the operational business.
Benefits to the Company
The benefits to the company were significant including:
- Our capability to model finished SKU’s increased from 73% to 92%.
- The throughput or the volume of cost estimates generated increased nearly 2x.
- Successful new product introductions were occurring with projects delayed or appropriately cancelled if target cost was not being achieved.
- Consistency in modeling application across all users was now facilitated as a function of the aPriori database environment.
- Peers were more engaged in sharing knowledge or asking for assistance because of the commonality of knowledge.
- Cost alignment between cost engineer, buyer, and design engineer was stronger.
Now, I certainly don’t want to give the impression that it was all lollipops and rainbows. There were challenges to achieve the results. We had our share of learning and difficulties. One such example was with structured bills of materials. The previous software only required that all the parts existed in the cost estimate. aPriori supports structured BOM’s, so users needed to understand how parts within an assembly grouped together or rolled up in cost. As a result of the detailed routings provided by aPriori, the buyers within purchasing became much more aware of the drivers of cost. Suppliers were requested to provide similar quote detail in order to negotiate not only the total price but individual elements (material, labor, overhead, cycle time, margins). Organizationally, many within engineering, purchasing, and target cost management strengthened their manufacturing knowledge and understanding of how components are made within specific processes.
What Made Our aPriori Implementation Successful
Thinking back on what made our implementation of aPriori successful are the following:
- Selection of a product that could provide a single environment for cost estimating. Implementing aPriori allowed for elimination of all supplemental methodologies globally. Cost Modeling is solely driven by aPriori.
- Global consistency or said another way, common modeling application regardless of location. Regardless of where the user is located or if traveling, they can login to any of the regional aPriori databases and have the exact same view of the application and data. There are no regional differences in modeling methodology – it is truly an enterprise application.
- Complete capability, whether it be components like metal stamping, injection molding, or die casting or assemblies such as motors, valves, pumps, and to have equal capability regardless of modeling from CAD, Print or Physical part. Having complete capability to generate results and never finding ourselves in a situation to say “the software can’t support that.”
- Ability to completely customize the software to ensure that the results would be predictable to our supply base and manufacturing processes. We have achieved a predictive tolerance of +/- 2% variation of cost model to quotation based on defined inputs. Because we deployed aPriori within our Target Cost Management organization, this predictability was required for the success of the deployment.
- Data and Analysis. Having the database/data warehouse environment provided the ability to generate reports and datasets of information. The team transitioned from data managers to influencers by creating information and guiding decisions within new product introduction.
My Overall Experience Working with aPriori as a Customer
I spent 6 years interacting with aPriori as a customer and, obviously it was a great experience, else I wouldn’t have considered joining the company. There is so much more that aPriori can do beyond what has been outlined above and the product suite continues to improve.
What I learned about aPriori during this six-year experience is that they are committed. At one point during the sales process they decided to back out of consideration. I was shocked! I had never experienced a salesperson saying “We don’t think we are right for you.” It has become clear that as much as aPriori wants to make a sale, they want to have successful customers first. Throughout the whole engagement, and still today, there is a primary contact who ensures that a customer’s deployment is successful and any issues are properly handled by Support, Development, or any other function within the Company. The other observation is that the aPriori team listens to its customers. The software is updated at least twice per year, many times containing new functionality or enhancements requested by the users.
Speaking of users, I was Co-founder and leader of the aPriori User Council. This self-managed network of aPriori’s customers from across the globe was initiated in the year 2014 and remains active today. This group is focused on collaborating between companies to share best practices and learnings in usage surrounding the aPriori environment. This premier group of customers also help drive aPriori’s product direction by system & architecture needs, usability and satisfaction, and also product development with early visibility testing or solution reviews. The leadership of aPriori supports this business network, but it’s the responsibility of the members to maintain its success.
In summary, cost has always been my passion. I’m thankful to those who gave me the opportunity to select and deploy aPriori within a global organization. The past six years as an aPriori customer have been very rewarding. I am excited to now be a part of the aPriori team and look forward to helping customers achieve their product cost management objectives.
But don’t just take my word for it! Check out these additional case studies with other aPriori customers.