Thursday, May 4, 2023

Industrial Engineering Accompanied by Cost Estimating

My advocacy now is IEs must first concentrate on improving engineering elements and then move into productivity managerial elements and non-engineering areas. Machine work study or machine effort improvement, value engineering and design for manufacturing and assembly are major engineering based IE methods. All are available as existing methods.


Industrial Engineering is System Efficiency Engineering. - Narayana Rao


It makes engineering changes to products and processes to increase their efficiency - increase their productivity which means reduction in costs.

In some defence related engineering/production organizations, industrial engineering department is given the responsibility of preparing cost estimates to support marketing activity also apart from preparing cost budgets for production departments and processes. It is a rational way of organizing and industrial engineering discipline has the required activities in place in theory to support cost estimation for marketing purposes. So, we can say industrial engineering departments have the necessary data and activities in place to support marketing related cost estimation and also production budget related cost estimation.

In this connection the following modified explanation of industrial engineering given in the web site https://www.myaccountingcourse.com/accounting-dictionary/industrial-engineering-method is worth knowing.

What is the Industrial Engineering Method?

Definition: Industrial engineering method is a physical way of examining the relationship between cost drivers and costs by analyzing the inputs coming into the company, the outputs that are created, and the work that goes into the process. In other words, it is a detailed look at the entire production process and how that process affects the costs of an organization.

What Does Industrial Engineering Method Mean?
What is the definition of industrial engineering method? Regardless of the specifics of a manufacturing process, units go in and outputs are created at a manufacturing company. When there is a physical relation between those inputs and outputs, analyzing that relationship can help managers to examine and control costs. Industrial engineering measurements related to productivity and cost help in this. Time taken by machines and men is directly related to productivity of resources and cost of output. Therefore time studies that measure  how much direct machinery time and manpower time  is needed to produce a certain amount of output are conducted by industrial engineers. Time study is also the basic measurement for efficiency improvement. Reducing the machine hours and labour hours based on engineering modifications is the focus of industrial engineering. Hence every industrial engineering project or study begins with a time study, cost study, and productivity study. When an industrial engineering project is completed, its benefits are indicated by once doing a time study, cost study and productivity study. As an intermediate stage, estimates of time, cost and productivity are made by industrial engineers.

The site gives the example of a large business that manufactures curtains with some being cloth, dye, thread, machine hours, and labor, and output being  the finished curtain. Industrial engineering identifies the  physical relationships between the inputs and the output. It will measure or determine  how much of each input produces a certain amount of output (partial productivity of the input). For example, the finding that  it takes two hours of direct labor to produce twenty square feet of curtain is a useful piece of information.

Summary Definition
Definition of Industrial Engineering Method: It is a way of comparing cost drivers and objects to see how the company can make its operations more efficient.


What are the Basic Steps for Industrial Engineering + Cost Estimation



Understanding Processes and Costs


Receiving and Maintaining Product Designs and Process Plans
Receiving Cost Reports - Periodical Reports and Product Orderwise Reports, Productivity Reports


Analyzing Processes and Costs


Preparing Process Charts and Product Charts based on Shop Observation and Study in standard IE Charts and Diagrams. Analyzing Cost Information and Productivity Reports

Product Improvement, Process Improvement and Cost Reduction

Product Improvement, Process Improvement


Product Industrial Engineering
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Design to Cost projects require multiple cost estimates. Each time a new alternative is created in the direction of reduced costs, a new estimate is to be made.

DFMA has cost modelling components.

DFMA Lessons - IE Online Line Course Notes.




Process Industrial Engineering

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Preparing new material requirement specifications and resource requirement specifications for products and processes and inputs. Time estimates or measurements prepared.

Preparing Cost estimates and doing Cost measurement after Improvement


Preparing Cost Estimates for Supporting Marketing Efforts/Quotations/Bids



Product Cost Estimates and Supporting Process Cost Estimates are done using the latest reduced costs. When feedback is given by marketing on these bids at various stages, they are studied and understood. The process repeats with the first step.

Engineering Cost Estimating
(http://acqnotes.com/acqnote/tasks/engineering-cost-estimating  Defense acquisition made easy site)

The Engineering Cost Estimating method builds the overall cost estimate by summing detailed estimates done at lower levels of the Work Breakdown Structure (WBS). It’s a technique where the system being costed is broken down into lower-level components (such as parts or assemblies), each of which is costed separately for direct labor, direct material, and other costs. The estimates for direct labor hours are done using analyses of engineering drawings, standard time data and contractor or industry-wide standards.

Engineering estimates for direct material have to be made for  raw materials and purchase parts based on drawings and "make or buy" decision. The remaining elements of cost (overheads including specific items such as quality control) may be expressed in terms of the direct labor and material costs. The  cost estimates at lower component level  are aggregated or totaled and hence the method is called “bottoms-up” estimate). The use of engineering estimates requires extensive knowledge of a system’s (and its components’) characteristics both product design and process plan, and lots of detailed time study and cost study data.

Because of the high level of detail, each step of the work flow should be identified, measured, and tracked, and the results for each outcome should be summed to make the point estimate.

The  advantages to the Engineering Cost Estimating method include:

The estimator’s ability to determine exactly what the estimate includes and whether anything was overlooked,
That it gives good insight into major cost contributors, and
The details of one product can be transferred to other products.

To do engineering estimating, the product specification must be prepared at component level.
All product and process changes also must be communicated to IE department so that they are  reflected in the estimate


More detailed are available in

Defense Acquisition Guidebook (DAG)
GAO Cost Estimating and Assessment Guide
NASA Cost Estimating Handbook – 2008

Cost Estimation 

Process, Planning And Cost Estimation

R. Kesavan

New Age International, 2004 - Manufacturing processes - 258 pages

This Book Is An Attempt To Provide All Necessary Information About Process Planning And Cost Estimation. The Subject Matter Has Been Presented In A Simple And Systematic Way With Numerous Diagrams And Illustrations So As To Enable Thorough Understanding Of The Topics.

https://books.google.co.in/books/about/Process_Planning_And_Cost_Estimation.html?id=A9-ZXblNrPoC


Cost Estimating in Design for Manufacture and Assembly Books


Product Design for Manufacture and Assembly, Third Edition

Geoffrey Boothroyd, Peter Dewhurst, Winston A. Knight

CRC Press, 08-Dec-2010 - Technology & Engineering - 712 pages

https://books.google.co.in/books/about/Product_Design_for_Manufacture_and_Assem.html?id=W2FDCcVPBcAC 

Note: It is important to read the books by Boothroyd to understand the full method of DFMA. The DFMA method is to be combined with Value Analysis and Engineering to do product industrial engineering




https://www.degruyter.com/view/j/eng.2016.6.issue-1/eng-2016-0002/eng-2016-0002.xml

https://www.researchgate.net/publication/223817612_Cost_estimation_in_mechanical_production_The_Cost_Entity_approach_applied_to_integrated_product_engineering

https://onlinelibrary.wiley.com/doi/10.1002/9780470172339.ch88  Ch 88 of IE Handbook Salvendy

https://www.sciencedirect.com/science/article/abs/pii/S0925527305001465

https://hal.archives-ouvertes.fr/hal-00732117/document

http://journals.sfu.ca/ijietap/index.php/ijie/article/view/285/209

https://books.emeraldinsight.com/page/detail/Cost-Engineering-and-Pricing-in-Autonomous-Manufacturing-Systems/

https://books.google.co.in/books?id=6rK1UtCXk5cC&printsec=frontcover#v=onepage&q&f=false



Why Industrial Engineers Should Learn to Estimate Jobs

Cost Engineering  Definition of AACE

Cost Engineering is the application of scientific principles and techniques to problems of estimation; cost control; business planning and management science; profitability analysis; project management; and planning and scheduling.

Total Cost Management
Total cost management is that area of engineering practice where engineering judgment and experience are used in the application of scientific principles and techniques to problems of business and program planning; cost estimating; economic and financial analysis; cost engineering; program and project management; planning and scheduling; cost and schedule performance measurement, and change control.

Simply stated, it is a systematic approach to managing cost throughout the life cycle of any enterprise, program, facility, project, product, or service. This is accomplished through the application of cost engineering and cost management principles, proven methodologies, and the latest technology in support of the management process.

http://web.aacei.org/about-aace/what-is-cost-engineering
Cost Engineering: New Profession - https://www.jstor.org/stable/pdf/40225654.pdf

Estimating and Costing in Construction.






Updated on 4.5.2023,  14.1.2022, 30 Nov 2021,  4 July 2021, 23 September 2020.
27 November 2019









3 comments:

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  2. Kesavan's book on cost estimating - process planning.
    https://drive.google.com/file/d/0BzOdibkr6Q1geG00Q2hBaHVLZzA/view?resourcekey=0-lmNbj0kLvNRDopNGPYqpfw

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