Cost CENTRE-ing: An Agile Cost Estimating Methodology for Procurement

Abstract

The paper presents a cost reduction methodology to be deployed within the procurement function for enabling the more efficient operation and cost management of supply chains. Cost CENTRE-ing involves six procedural steps of: item Classification; data Encircling; cost driver Normalization; parameter Trending; cost Reduction identification; negotiated Enforcement. The methodology is applied to industrial case studies at Bombardier Aerospace Belfast for validation. The case studies embrace a representative range of procured aerospace parts in highlighting the generic nature of the method; including outside production, raw material and bought-out (vendor specialized) systems. The proposed methodology is applied in these three validation studies to show that it is effective over a wide range of applications (generic), has been used to significantly reduce the cost of supplied items (accurate), and is being adopted by a leading aerospace manufacturer (relevant). It is concluded that the proposed methodology exhibits all the above because it is based on an improved understanding of supply chain cost management; thereby contributing to the body of knowledge in terms of process understanding; the importance of a causal relations in estimating; and identifying inheritance and family relations in groups of products. It is shown that the Cost CENTRE-ing method provides an agile method for responsive cost analysis, estimation, control and reduction of procured aerospace parts.