'Should Cost' in a Global Environment

摘要

The aerospace industry which was largely concentrated in North America has now gone global with work content moving to low cost producing countries like Turkey, China and India. To be competitive globally, US and European companies are establishing joint ventures and transferring work overseas. Also the affordability pressures for the commercial and military aerospace industry demands a clear understanding of "Should Cost" in light of advanced manufacturing technologies and the global business model. However, the skills required for determination of "Should Cost" are not adequate in industry today and hence the task is even more challenging. This paper attempts to underline the approach, tools and techniques for determination of "Should Cost", especially in a global environment. The definition of "Should Cost" is relative and controversial and has been evolving over time .It also depends on the organization defining it, the environment and the circumstances under which the answer is sought. The following definition is offered by the Office of the Secretary of Defense (OSD): "Should Cost" is defined as the cost that would be incurred by the Military Department if the system were to be operated and maintained in accordance with accepted industry standards and all applicable and relevant federal, state and local legal and regulatory requirements.... Historical costs and trends derived from them have been often considered as benchmarks for "Should Cost". However globalization and worldwide supply chains have created a scenario which demands a different approach for an internationally competitive product. The major elements of cost (and hence price) depends not only on material and labor but by other variables such as: 1.Maturity of product 2.Material form/shape 3.Maturity and method of manufacturing process 4.Machine utilization and productive operating time 5.Wrap rates including labor and overheads 6.Production rate Material cost has traditionally been determined by raw material $/lb. and usage factor. Labor hours can be estimated for work content by the application of Industrial Engineering standards and appropriate realization factors associated with the manufacturing process. Realization factors under continued production are a function of an improvement curve dependent on some of the factors mentioned above and the extent of automation. This paper outlines the recommended process, skills and tools required to determine the determination of "Should Cost" at a part/assembly/system level.