Siemens 9 10-final_version_sould_costing_webcast_4_3

Unrestricted © Siemens AG 2013 All rights reserved. Smarter decisions, better products.

© 2014 IHS

Information | Analytics | Expertise

COLLABORATING WITH

SUPPLIERS

Where "Should Cost" Fits in the Equation

SEPTEMBER 2014

Katie Tamblin, Director, Supply Chain Solutions, IHS

+44 203 159 3377

[email protected]

© 2014 IHS

IHS INDUSTRIES

3

ABOUT IHS

AEROSPACE & DEFENSE

100+ years’ experience

delivering unrivaled news,

insight and intelligence on

defense and security

equipment, markets,

industries and risk

CHEMICAL

Over 200 leading industry

authorities creating integrated

views and analysis across

more than 300 chemical

markets and 2,000 processes

for 95 industries

FINANCE

Research on 200+

countries and territories

with harmonized indicators

from IHS analysts and

economists

TECHNOLOGY

World’s largest

electronics component

database with more than

350 million parts

AUTOMOTIVE

The world’s largest team

of automotive analysts with

hundreds of experts located

in 15 key markets around

the world covering the entire

automotive value chain

ENERGY

Extensive Oil & Gas well

information on 5.5+ million

wells worldwide dating

back as far as 1860

MARITIME

World’s largest maritime

database with an information

gathering heritage of 250+

years with comprehensive

information on all vessels 100

GT and over

© 2014 IHS

Recognized by World-Class Leaders

© 2014 IHS

Understanding Should-Cost

• What raw materials drive your suppliers’

costs?

• Is the price your supplier quoted fair and

sustainable?

• How can I use should-cost estimations to my

advantage?

5

Fastener Manufacturing: Prices versus Costs

© 2014 IHS

Buyers Sellers Neutral

6

Current pricing environment is mostly favorable to buyers

Chemicals

Steel

Nonferrous Metals

Precious Metals

Category Buying Strategy Notes

Equipment

Plastics Wait

Buy Now

Energy savings yet to filter down

More attractive next quarter

Chinese prices nearing bottom

Certain metals are attractive

Recently settled labor disputes

should help guide prices lower

Prices remain low

Buy As Needed

Buy As Needed

Buy As Needed

Buy Now

© 2014 IHS

North American Steel

Demand

+Demand is growing at solid, albeit unspectacular, rates. Vehicle sales and construction activity have both rebounded sharply following a slow start to the year

Supply

- Supply remains ample across product categories

+Trade cases continue to cast a shadow over the industry, with a final review on oil country tubular goods (OCTG) expected sometime in the next two months

Prices

• Prices for plate and special quality bar remain unattractive, while sheet and pipe prices favor buyers. Supply disruptions next year will drive prices for most products higher

7

Current pricing generally favors buyers but conditions are shifting

Buying Environment

Next Quarter (2014Q4)

Next Year (2015)

Worse

Worse

550

600

650

700

750

800

850

2011 2012 2013 2014 2015 2016

Prices look attractive for now

Hot-rolled sheet, dollars/short ton

Rebar, dollars/short ton

© 2014 IHS

IHS Forecast Accuracy: U.S. Steel Price

8

0

200

400

600

800

1000

1200

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Actual Forecast

Spot Price for Coiled Plate

($/ton)

One-Year Forecast - from 1995 to 2013

Average Error ($/ton) 16.56

Average Absolute Error ($/ton) 55.94

Accuracy Rating 91%

© 2014 IHS

Summary • Consistent, transparent strategies for

supplier collaboration

• Best practice to understand should-cost

• Most efficient way is to outsource

forecasting to ensure consistency,

accuracy, and visibility

• Forecasts can be incorporated into

toolsets in order to accurately assess

and plan for product lifecycle

management

9

© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any

internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must

display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and

completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any

errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please

contact IHS at [email protected], +1 800 IHS CARE (from North American locations), or +44 (0) 1344 328 300 (from outside North America). All

products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners. V2.0-29.04.14

Americas:

+1.800.IHS.CARE (+1.800.447.273);

[email protected]

Europe, Middle East, and Africa:

+44.(0).1344.328.300;

[email protected]

Asia and the Pacific Rim:

+604.291.3600;

[email protected]

Contact us

Thank you!

Unrestricted © Siemens AG 2014 All rights reserved.

Siemens PLM Software

Collaborating with Suppliers -

Where ”Should Cost” Fits in the Equation

Rohit Tangri, VP, Teamcenter Product Management, Marketing & Business

Development, Siemens PLM Software



The imperative for should-cost

Key challenges

Manufacturers

need high

degree of cost

transparency

Short product

lifecycles,

complex

product

structures

Quick

availability of

reliable cost

estimates

„Spreadsheet errors have

been going on for years

with impacts in

BILLIONS... IT HAS BEEN

estimated that 88% of

spreadsheets have some

sort of error in them”.

(Source: CNBC; F1F9)

Frequent

product and

process

innovations

High

competition

and cost

pressure



Team

cente

r P

roduct

Cost M

anag

em

ent

Typic

al

situation

Database


Transformation to an integrated solution

Situation/Complication

• Many disconnected spreadsheets

• Poor integration to other systems

• No infrastructure for sharing data and costing knowledge

• No standardized costing methods and inconsistent data

• Cost figures neither repeatable nor comparable

• Inefficient costing processes and low transparency

• No systematic tracking and optimization of product

costs

Solution

• Platform to manage cost knowledge and consistent data

• Fact-based and cost-driver-transparent calculations on

cost methods and models

• Cross-functional collaboration & communication with an

integrated solution



Methodology

• Overhead calculation

• Bottom-up costing

Cost Modeling

• Bill of Material (BOM)

• Bill of Processes (BOP)

• Material parameters

• Process parameters

• Overheads

Output

• Cost roll-up

• Processes / Products

• Assemblies / BOM / Parts

• Cost compositions

• Reports

Flexible costing based on bill of material & bill of processes


Methodology of flexible bottom-up costing

Material

Overhead Costs

Residual Mfg.

Overhead Costs

Raw Material

Raw Parts

Manufacturing

Step n

Geometry/ Volume

Materials

Tolerance/PMI

Bill of Material

(BOM)

Predictive VE

Should cost Tool

Set-up

Machines

Labor

Process

Manufacturing

Parameters

Manufacturing

Step 1

Tool

Set-up

Machines

Labor

Process

Manufacturing

Parameters

…

Material

Overhead Costs

Overhead (General, Sales & Administration, R&D …), Program Volumes,

Program Life, Target Costs, Logistics and Profit

Residual Mfg.

Overhead Costs




Focus on predictive & should costing

- BOM

- Material

- Geometry

- …

- Cost rates

- Material prices

- BOM, work plan

- …

- Product Portfolio Mgmt.

- Management Reports

- …

Product & process

engineering

Concept

development

PLM Interfaces/

Data

Teamcenter

Product Cost

Management

Serial & Post costing

BI

External supplier parts

Ramp

up Serial

production

After

market

ERP system:

Only costing of products after SOP based on

real production data and real supplier prices

ERP

Product

definition

In-house parts / assemblies

Pre & target costing

SOP EOP EOS

Design-to-cost

Purchase price analysis

Profitability calculation

Open book accounting




Comprehensive cross-functional solution

Profitability

Calculation

Controlling/

Finance

Adequate

Return on Investment

Key application fields

Pre & Target

Costing

Controlling/

Finance

Purchase Price

Analysis/Should-Cost

Purchasing/

Cost Engineering

Best-Cost-based

Purchase Prices

Open Book

Accounting

Sales /

Program-Mgmt.

Profitable

Sales Prices Achievable

Cost Targets

Standardized Methodology - Consistent Data Management - Transparency - Efficient Processes/Interfaces

Design-

to-Cost/Should-Cost

Cost

Engineering

Cost-adequate

Product Designs



The imperative for should-cost Meeting the high demands of purchasing should-cost analysis

Situation / Complication

• High demand for accurate and detailed cost calculations

particularly for high-volume parts (e.g. Automotive,

Machinery, Hightech, etc.)

• Purchased components often make up over 50 % of

production costs

• Knowledge of price structure, cost drivers and external

manufacturing processes is increasingly important

• Increasing amount of complex manufacturing processes

Solution

• Transparent and accurate should costing based on

integrated knowledge database, cost models and cycle

time calculators

• Simulation of price effects based on modified raw material

prices, changed manufacturing parameters or processes,

global factor costs, etc.

• Negotiation based on facts (processes and parameters)




Simulation capabilities

Where to manufacture?

• Make or Buy

• Mfg. plant (e.g. green vs. brown field)

• Best Cost Country Sourcing

What if commercial factors vary?

• Production volumes

• Prices of raw materials & purchased parts

• Cost and overhead rates (e.g. labor)

• Exchange rates

• Depreciation standards for investments

What if technical parameters change?

• Product/design variants

• Manufacturing technology

• Materials

• Process parameters (e.g. utilization, scrap rate)

Simulation of commercial and technical what-if scenarios

Up?

Down?

Cost

impact?




Bottom-up purchase price analysis

Analysis

Bottom-up

cost calculation

Benchmarks/

best-practice

processes

Analysis of cost

structure/drivers

Benchmark

calculation 1

Initial price

judgement

Validation

Validation process

/ cost data

Research and

expert

discussions

Adjustment of 1st

Price Calculation

Process

validation 2

Validated

target price

RFP to Alternative

Suppliers

Comparison of

Cost-break-down

Comparison of

Process

Parameters

Benchmarking

of alternatives 3

Market conform

cost parameters

Realization

Implementation of

Agreed Measures

Project follow-up /

Controlling

Contractual

Agreement

Realization of

potential 5

Final price

achieved

Negotiated cost

structure

Preparation

Supplier-side

Process

Evaluation

Cost Structure

Negotiation

Final

discussion 4

$

First offer

Should Cost with Teamcenter Product Costing




Integrated costing process for products and tools

Comprehensive project overview

• Unified platform for product and tool costing

• Full system integration, no (manual) interface

• No redundant data in different systems

• Automatic roll-up or amortization of tool cost

across product BOM and project

• Total impact of changes is immediately visible up

to the project level




Should Costing within Teamcenter




Valuable data content for reliable should cost estimates

material is selected from the master data.

Knowledge Domain Processes

Pre-configured reference

processes for numerous

manufacturing technologies

Production Sites

Global labor rates & other factor costs for

all relevant countries & regions




Manufacturing steps

The cycle time for this

manufacturing step is calculated

depending on the machine and

the used material.




Reports

Comparing 2 calculation variants

and showing the impact of changing

cost factors such as production site,

manufacturing technologies etc.

The calculation presents the

results for this part.




Executive Summary

Meet high demand for accurate and detailed cost estimates for

industries with a high production volume

Leverage product cost optimization by combining controlling with cost

engineering capabilities in a single, easy to use tool

Realize reliable should cost estimates by using valuable reference

data with flexible cost models (e.g. for purchase price analysis)

Optimize product costs in order to maximize margins, profits and

return on investment (ROI)

1

2

3

4

Based on one unified platform, fully integrated product and tool

costing to ensure consistent data and a seamless process 5




Further information

For more information please visit

http://www.siemens.com/plm

http://www.plm.automation.siemens.com/en_us/products/teamcenter/product-cost-management/index.shtml

http://www.plm.automation.siemens.com/en_us/products/teamcenter/product-cost-management/index.shtml

Internet

Siemens 9 10-final_version_sould_costing_webcast_4_3