Product Costing Development in Outsourced Manufacturing
Honkainmaa, Toni (2021)
Honkainmaa, Toni
2021
Tuotantotalouden DI-ohjelma - Master's Programme in Industrial Engineering and Management
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2021-04-27
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202104223329
https://urn.fi/URN:NBN:fi:tuni-202104223329
Tiivistelmä
Majority of product costs are determined during a product development process and therefore it is important to be able to accurately estimate impacts of decisions made during the process. In general, the impact of the decisions is greater the earlier they are made. However, there is only limited amount of information available at the early stages of the development process which is why the decisions usually lean on assumptions and existing information gathered from previous projects. This, however, may lead to underestimate costs of products that differ from the ones developed earlier.
This thesis was assigned by a company whose target was to start new costing activities with the support of a recently acquired product cost management software. It was identified that their costing activities varied between development projects and that design related decisions leant heavily on designers’ expertise, intuition and assumptions. In addition, product costs were estimated by the mass of a structure which favours light structures and disregards manufacturing costs. In order to produce more reliable cost estimations in the future, the objectives of this thesis were to create capability to estimate costs of outsourced steel products with the software and a plan for future actions to improve cost knowledge in the case company. Since manufacturing of the company’s steel products is outsourced, there was no needed information available inside the case company which significantly changed the character of the research. The research was carried out as a case study in which information was collected from literature and discussion-like interviews with the case company’s internal stakeholders and sub-contractors.
Based on the conducted literature review about different product cost estimation methods, feature-based costing was chosen to be used in this thesis. It was seen that the method supports the bottom-up costing executed in the product cost management software and enables the utilisation of information which was already being collected into a product data management system. In this thesis, product costs were divided into material costs, manufacturing costs and overheads. Since the manufacturing costs were calculated as a product of duration and hourly rates, different processes used to produce steel components were individually described. Manufacturing parameters for estimating the duration of different manufacturing steps were determined and a manufacturing time calculator was created based on them.
The capability to estimate product costs with the help of the product cost management software and the manufacturing time calculator was tested by estimating five different products purchased by the case company. The resulted accuracies and deviations were considered excellent. However, due to several factors a concern was left about the reliability of the results. It was seen that more estimations need to be done in order to find out the real accuracy of the estimation method.
Based on the issues identified during the research project, a development plan was created. It was recommended that the case company should focus on improving the current method and information flows as well as creating new tools for costing. Concrete actions for each area were recommended to provide clear guidelines for the case company to continue the good progress made during this thesis. It was seen that by carrying out the plan, the case company will have a significantly improved capability to estimate costs during their product development process and a better understanding about the factors that affect the product costs.
This thesis was assigned by a company whose target was to start new costing activities with the support of a recently acquired product cost management software. It was identified that their costing activities varied between development projects and that design related decisions leant heavily on designers’ expertise, intuition and assumptions. In addition, product costs were estimated by the mass of a structure which favours light structures and disregards manufacturing costs. In order to produce more reliable cost estimations in the future, the objectives of this thesis were to create capability to estimate costs of outsourced steel products with the software and a plan for future actions to improve cost knowledge in the case company. Since manufacturing of the company’s steel products is outsourced, there was no needed information available inside the case company which significantly changed the character of the research. The research was carried out as a case study in which information was collected from literature and discussion-like interviews with the case company’s internal stakeholders and sub-contractors.
Based on the conducted literature review about different product cost estimation methods, feature-based costing was chosen to be used in this thesis. It was seen that the method supports the bottom-up costing executed in the product cost management software and enables the utilisation of information which was already being collected into a product data management system. In this thesis, product costs were divided into material costs, manufacturing costs and overheads. Since the manufacturing costs were calculated as a product of duration and hourly rates, different processes used to produce steel components were individually described. Manufacturing parameters for estimating the duration of different manufacturing steps were determined and a manufacturing time calculator was created based on them.
The capability to estimate product costs with the help of the product cost management software and the manufacturing time calculator was tested by estimating five different products purchased by the case company. The resulted accuracies and deviations were considered excellent. However, due to several factors a concern was left about the reliability of the results. It was seen that more estimations need to be done in order to find out the real accuracy of the estimation method.
Based on the issues identified during the research project, a development plan was created. It was recommended that the case company should focus on improving the current method and information flows as well as creating new tools for costing. Concrete actions for each area were recommended to provide clear guidelines for the case company to continue the good progress made during this thesis. It was seen that by carrying out the plan, the case company will have a significantly improved capability to estimate costs during their product development process and a better understanding about the factors that affect the product costs.