Product development cost estimation and optimisation in a global manufacturing environment

Abstract

In the early stages of a product development process, the estimate of a developing product life cycle cost is the primary information which will he needed to determine the profitability of the product. The more reliable is the cost estimate process, the more likely the right decision will he made. This has become an important issue for rapid product development. In this paper, an Internet based cost estimation and optimisation system will be reported, which is a subsystem of the Rapid Product Development system for one-of-a-kind production (OKP) developed at the University of Canterbury. The product development cost under consideration in this paper is the sum of the costs of product design, production and logistics, which is the main cost of a product. Some other possible costs associated with a product development cycle, e.g. overhead costs, are normally proportional to this main product development cost and in practice they are estimated by multiplying a constant percentage to the product development cost. Unlike some earlier research which focused on the cost estimate in a single manufacturing company, this Internet based cost estimation system aims at the product development cost estimate and optimal control under the complexities of a global manufacturing environment. The proposed Cost Estimate and Optimal Control methods and algorithms have been implemented in a sheet metal manufacturing company. The industrial implementation is reported in the end of this paper.