A Cost Modeling Example for More Accurate Decision Making
Leah Archibald: I am here live at aPriori’s 2022 Manufacturing Insights Conference with one of our expert cost modeling users, Caroline Leclerc from Soucy. Thank you so much for joining us. Can you tells us about your role in procurement and how long you’ve been using aPriori for cost estimation?
Caroline Leclerc: I’m a team leader working at Soucy Track System and I’ve been working with aPriori for five years now.
Leah Archibald: And where are you in the decision making structure when it comes to supply chain strategy?
Caroline Leclerc: I do cost analysis of the Track System. We analyze cost drivers and compare overhead costs, raw materials cost, labor costs and total costs between different regions, for example, China, Vietnam, and the US. The bottom line is I’m looking at which region has the optimal cost structure for what we want to do with that part. We call it cost analyst, but it’s really a specific allocation of cost modeling methodology.
Leah Archibald: Tell me what the transition was like going from an Excel-based type of model, where manufacturing costs were pretty static, to more dynamic activity based costing?
Caroline Leclerc: Well, it saved us so much time and effort. It’s easier to do an accurate cost report and to send that to the engineering team. Then they can understand the cost drivers — where the main cost is coming from— and they can make some bottom line decisions that lower cost. They can also see if the new product is manufacturable, or if it needs to be corrected. The report gives them metrics on manufacturability and cost at the same time, so they can get cost savings while working on the product.
Leah Archibald: So it’s changed your level of collaboration with stakeholders on the engineering team.
Caroline Leclerc: Yes, exactly.
Leah Archibald: Has that been a ramp-up to get to the new methodology? Did it take some time for the engineers to understand cost modeling examples and bring them into their decision making?
Caroline Leclerc: Yes, at first, they weren’t understanding what aPriori was. It was like a big black box, and they were thinking just “click on total cost.” But no, it’s more than that. You can use it to baseline your costs, and to compare allocation across different regions and different manufacturing processes. Optimal cost modeling means using the whole methodology to cost components and better build products.
From Cost Modeling to Supply Chain Cost Savings
Leah Archibald: Has there been any change in the way that you’ve used aPriori over the past five years?
Caroline Leclerc: Yes, we started using it to calculate unit cost, overall cost, etcetera, but now we are using it to negotiate with the suppliers, which is very nice. And the suppliers understand that the should-cost coming from aPriori is not just a number — there’s analysis behind it. And so, yes, it’s driving cost savings for us.
Leah Archibald: So you started off extracting cost savings from your manufacturing processes, and then you started using the same software to get cost savings from your supply chain?
Caroline Leclerc: Yes, exactly.
Leah Archibald: Are you excited about looking towards other areas of expansion, like carbon tracking?
Caroline Leclerc: Yes. It’s the subject of the hour. Everyone’s talking about it. And yes, we have a new objective about that. So I’m very excited to know how aPriori can help us improve the carbon bottom line.
Leah Archibald: So you started with cost modeling, you drove down total cost in the supply chain negotiation, and now you’re going to be working on carbon. That’s a good summary.
