A PARTICULAR ASPECT OF DECIDE BID DECISION SUPPORT
SYSTEM : MODELING OF LIFE-CYCLE PROCESSES AND COSTS
H Soliveres, TSI (Thomson-CSF Services Industrie),
105 Avenue du Général Eisenhower, BP 1009, 31023 Toulouse Cedex email : [email protected]
A.M. Alquier, INPT-GSI, 6 allée Emile Monso, 31029 Toulouse Cedex [email protected]
ABSTRACT
ESPRIT project DECIDE n° 22298 develop a methodology and a related decision support system to assist user companies in their bidding process .
In this paper, the costing module will be discussed, in regard of industrial expectation for logistic business.
This module is based on an Enterprise Products and Processes Repository (EPPMR). It manages product breakdown structure, supports the technical description of a bid, re-using previous bids elements (know-how capitalization).
TSI developed a specific tool for logistic support cost evaluation (SICLO). This specific tool proposes a detailed cost structure, year by year, including all the elements involved in their product support : documentation, training, spare parts, test benches, maintenance,... As a result, it is possible to evaluate the overall global cost and its yearly decomposition. The focus will be on the use of DECIDE in the ILS (Integrated Logistic Support) business.
In this way, common points and differences will be developed in order to promote DECIDE toolkit in this business context.
KEY WORDS
Logistics, life-cycle, corporate memory, knowledge capitalization, decision systems, human factors in design.
1. CONTEXT
Each time a new invitation to tender triggers the manufacturer's relevant sales and projects departments into creating ideas and working to consider the following type of questions:
-Should we reply to this invitation to tender?
-What technical solution should we propose?
-What sales price should we fix?
-What is the minimum acceptable profit margin?
-How do we develop a convincing strategy?
The decisions to be taken are made more difficult due to the many parameters to be considered:
-the company's own context (development strategy, sales policy, internal costs, level of technology, sector of activity, skills, previous project results, etc.)
-external factors ( market prices, competitor know how and position),
-client context and requirements (knowledge of sector, company history, product life time and method of use, etc.) -etc.
The procedure for replying to tenders means integrating and dealing with all the above information. In order to be efficient in this area, companies organize themselves by applying a methodology
adapted to their own context, with the assistance of software tools (databases, costing, pricing, etc.).
This document presents the current research at INPT-GSI to develop such tools adapted to this issue and the related concepts and methodology.
The main reason of concentrating on the life-cycle first phase (bid process or product concept, called conceptual phase) is because, then, all actions are possible, the various issues have the greatest degree of liberty, and the decisions have the most important impacts. But reliable evaluation is also very difficult to make. This can be schematized saying that an inexpensive feasibility study will help quantify costs and provide a basis for deciding whether to go into development phase with minimum of risks. This is even more obvious with innovative products or processes, which is the case in DECIDE.
We will focus on the costing module of the DECIDE project. It includes a product * process* resource description whose adaptation to the problem of Life-Cycle modelling and calculation will be evaluated in perspective with a more specialised software, SICLO, developed for the needs of life cycle cost evaluation by the TSI logistics specialists. The comparison between these tools will give issues on the approach of DECIDE on LCC (Life Cycle Cost) evaluation and simulation, and therefore identify its interest, limitations, and the future extensions.
2. LIFE CYCLE COSTING CONSIDERATIONS
As far as costs are concerned, it is advisable to assess and simulate the consequences of the technical choices and commitments made by the company: cost of the proposed solution, long term support costs, etc. Maintenance and exploitation costs are used to argue the technical choices retained based on criteria other than just the acquisition cost: a solution may prove to be more advantageous if it includes minimized operating, maintenance and dismantling costs (life-cycle cost). 2.1 Total Cost Notion
The classic ICEBERG diagram clearly shows the interest of considering the total costs over the overall life-cycle while trying to determine as accurately as possible the hidden costs :
Documentation Tools Up grades Installation Training Repairs Software Infrastructure servicing Maintenance Penalties Spares Obsolescence Tests Modifications ACQUISITION Removal from service EXPLOITATION and MAINTENANCE
Life-Cycle Cost corresponds to the sum of the following costs:
-acquisition: research, development, production,
-system installation: infrastructures, training, documentation, design and production of the support system,
-operating,
-main system and support system maintenance,
2.2 Durability of the Support System The system life duration, as required by the user, is related to his own operating constraints as regards to the expected service, staff (numbers, training), agreed investments, etc.
Order of magnitude examples:
Aircraft : more than 30 years; Nuclear power station: 30 years; Military products (radar equipment, transmission systems): 15 - 30 years; Information System and related informatics: 10 -15 years.
The support system comprises all the elements, options and services for maintenance and durability throughout all of the system's operational life cycle. We are quite sure today that the delivered products would not be able to meet, in their initial condition, long term needs due to the frequency of technological developments.
The manufacturer is therefore advised to include in his proposal an operational lifetime warranty, and to offer solutions for prolonging products' life-cycle.
2.3 Design to Cost, Integrated Logistic Support in Project Management
Manufacturer applies a project management method to:
-confirm his ability to take in account the customer’s requirements on project management
-deal with the operations in progress (technical and financial aspects).
The project's Management Plan is the document issued by the manufacturer to define the work to be carried out (products to be developed, documents, etc.), the organization implemented, the references that he is committed to follow, the schedule (milestones, reviews, etc.), the overall control procedure, etc. This document include:
-the design to cost method, participants, cost targets, scheduling work meetings,...
-the Integrated Logistic Support process, design of the support system, targets to be obtained, work to be placed under the responsibility of maintenance specialists,...
3. DECIDE
The DSS costing and repository modules (DECIDE project) used for engineering and costing solutions deals with:
-decomposition of alternative technical solutions answering the customer’s requirements (EPPMR or « enterprise product process model repository »), with the required methodology adapted to bidding process
-analytical costing, i.e. costs evaluation established using elemental costs evaluation. The decomposition precision is a main issue in this type of costing, in opposition with parametric costing for example, which rests on only a few parameters (for example plane wig weigh). This module is at the cross-roads of several main research issues related to business process reengineering and innovation : project management, business process innovation, and the related cooperative and strategic decision support systems. This is needed to answer the technico-economical trade-off in bidding process. Michaels & Wood2 define the problematic of finding the right intermediate and cooperative structure in the « design to cost » method , which is a concurrent engineering approach, calling it «Cost Element Structure ». The problem of finding the Cost Element Structure is left unanswered. Their presentation is summarized in the following diagram :
high level of cost aggregation Emphasis: what we're selling Top-down cost estimating •
•
•origin: sales manager
Bottom-up cost estimating •low levels of cost aggregation •derived through piece-part •procurement, accounting,...
•Emphasis: what we're making and buying •origin: technical staff
General problem: develop acost element structure that
couples from top to bottom preserves the integrity of both approaches
At one end people need only a high level of knowledge organization, typically, sales managers, to avoid too much detailed information about the product because this could lead to loss of time, difficulties to organize a correct requirement answer in the proposal for example. Sales managers need aggregated costs i.e. costs on high level piece parts of the product, for the negotiation with the customer.
At the other end, other people need detailed knowledge leading to daily work organization, which is in correct correspondence with the global document reference of this work (customer contract). Typically, engineers in charge of quotations who need desegregated costs to make precise quotations.
2- corporate memory, with knowledge discovery, data mining and pattern modeling.
Help bidding process requires « Design history » or semantic memorization from previous tasks which is a company’s technological knowledge capitalization. This knowledge capitalization leads to the organization of standard parametric models of structural objects (see above the impact on the project management).
In pattern modeling, standard models of sub-products and of corresponding cost analysis, prepared in advance, lead both to considerable reductions of time, cost and improvement of risk position. Feeding information into a standard design data base (source data of product model
construction and of corresponding analysis) strengthens the company’s capabilities for full knowledge capitalization and handling. The outcome is a quite fully conceived design with a considerable potential for improved reliability at the beginning (for example bid phase) of a project.
Handle the two perspectives above leads to the organization of a cooperative high level information system (Alquier, 93). EPPMR deals with this problem.
The concepts for Intelligent Information System modeling which help knowledge emergence, corporate memory are:
- information profoundness is linked to knowledge representation technique, - information spatial organization relies on datawarehouse organization.
Which is a cooperative information system in the form of a decomposition into products* processes* resources and the modeling of the request to proposal1.
product process resource ... ... Technical solution elementary cost Costing
It corresponds to the CPPMR module which is the repository of the overall company know-how and contains technical and organizational information required for bidding. It is a data warehouse which includes mining links as well as the organization of extraction from the information system of the company.
4. SICLO
Available to logistics specialists, this tool contributes towards the final selection of a support scenario and it is used to evaluate the costs hidden in the ICEBERG (see § 1.1), with a Proposed Cost Structure : acquisition cost (research, industrialization, production, installation,....) and operation and removal from service cost (maintenance, services, management, consumption,...).
Its technical functionalities, according to the general decision support system architecture, can be summarized as below : Scenarios : The logistics specialist develops the different possible maintenance concepts, taking into consideration the customer's operational requirements, the company's constraints and know how, technological development, and the support expected from suppliers. Each concept gives rise to a scenario specifying the work to be carried out on a yearly basis from the start of the project until the end.
Data Entry : SICLO is mainly used to enter all the primary costs for each scenario. The software tool provides the operator with a complete cost structure which enables him to avoid omitting a subject ( service, maintenance option, etc.). Costs are entered in the form of cost units assigned to the various company control centers. Costs : The entered information is validated according to the company's own parameters (hourly rate, supply coefficients, etc.). The results are given in annual and total costs, expressed in monetary units.
Presentations : It is possible to obtain reports in table or histogram format. Total costs will be presented through out the life cycle or on a yearly basis.
-Cost of ownership, indicating the parts relative to acquisition, operation, maintenance and removal from service, -Acquisition cost, indicating the parts relative to the various elements,
-Maintenance cost, indicating the parts relative to the various elements,
-etc. Cost 0 20 40 60 80 100 Years Scenario no.1 Scenario no.2 Scenario no.3 operating support installed development 5 10 15 20
Cost increase representation throughout life cycle Scenario comparison
SICLO appears as a Decision Support System for bidding and design to cost process. The project manager can select a technical solution and a maintenance concept from the evaluations of the annual and overall budgets.
SICLO helps also to assess the commercial argumentation based on optimizing the total life cycle cost.
5. DECIDE FOR LIFE CYCLE COST Comparison between DECIDE and SICLO:
SICLO DECIDE
supports all pre-defined logistic elements. Products and services: - spare parts, documentation, test benches,..
- hot line, repair, on-site assistance, up grades,...
models all elements of the proposal in the form of : product* process* resource
evaluates annual
and global costs
evaluates global costs (costs are not dated)
SICLO DECIDE
presents obtained
results with graphs
(maturity of display effort) capability of exportation to MicroSoft products (EXCEL,...) information reliability based on operator experience and expertise. re-use validated previous elements estimations
autonomous cooperative use
traceability of previous bids cost elements
works on a stable
referential for costs
organized through experience directly in the software code feature modeling, knowledge capitalization over the time :
dynamic referential
stand alone potential connection
to information systems
only costing functionalities
in relation with the other modules :
pricing,value analysis of technical solutions
This comparison shows the main advantages of the DECIDE EPPMR : -adaptability to any logistic configuration and scenario
-connections with Information System -cooperative tool (GroupWare)
-costing in relation with pricing and value analysis for a global decision support. The two main improvements which could be assumed from the comparison with SICLO are :
-elements to be dated in order to obtain annual progression of cost
-graphic man-machine interface and more generally decision facilities (simulation, graphs, forms, hypertext,...).
An example of such a graphical decision facility is shown hereafter :
Acquisition
Exploitation and maintenance Removal from service Acquisition cost
Representation of accumulated costs
Cost of ownership
6. CONCLUSION
For logistic business, DECIDE appears as a useful tool with a global approach. It appears also that the further expectations mentioned above could be fulfilled.
For this topic the solutions that can be conceived are :
-associating both tools (in the present DECIDE toolkit development solution : ACCESS and VB, it is easy to interconnect both tools to cover life-cycle cost),
-or adding further development work.
7. REFERENCES
1. Alquier, 93 "Modélisation des systèmes d'information : modèle coopératif. Application à l'audit et aux schémas directeurs d'informatique" - Habilitation à diriger des recherches 1993, Université Toulouse 1
2. Michaels & Wood, 89 - Design to cost-Wiley, 91