CONCURRENT ENGINEERING: Research and Applications

Cost Estimation of Machined Parts within an Aerospace Supply Chain

P. Watson,1,* R. Curran1, A. Murphy1 and S. Cowan2

1
School of Aeronautical Engineering, Queen’s University Belfast (QUB), N. Ireland, BT9 5AG
2
Methods-procurement, Bombardier Aerospace Belfast (BAB), N. Ireland, BT3 9DZ

Abstract: A generic, hierarchical, and multifidelity unit cost of acquisition estimating methodology for outside production machined
parts is presented. The originality of the work lies with the method’s inherent capability of being able to generate multilevel and
multifidelity cost relations for large volumes of parts utilizing process, supply chain costing data, and varying degrees of part design
definition information. Estimates can be generated throughout the life cycle of a part using different grades of the combined information
available. Considering design development for a given part, additional design definition may be used as it becomes available within
the developed method to improve the quality of the resulting estimate. Via a process of analogous classification, parts are classified into
groups of increasing similarity using design-based descriptors. A parametric estimating method is then applied to each subgroup of the
machined part classification tree in the direction of improved classification, using a relationship which links design variables to manufacturing
cycle time may be generated. A rate cost reflective of the supply chain is then applied to the cycle time estimate for a given part to arrive at an
estimate of make cost which is then totalled with the material and treatments cost components respectively to give an overall estimate of unit
acquisition cost. Both the rate charge applied and the treatments cost calculated for a given procured part is derived via the use of ratio
analysis.

Key Words: cost engineering, manufacturing cost estimating, aerospace procurement.

1. Introduction differing levels of cost estimate to be generated through,

Since the mid-1990s, all major aerospace manufac-
turers have started implementing cost cutting measures
and have translated that same message through the
procurement function to their subcontractors. Today,
the factors critically important to the best practice of
procurement are: (a) the development of systems and
methodologies to measure performance of suppliers,
systems, and employees, and (b) the analysis of
company’s overall spending and practices that make
optimal use of buying leverage, supplier expertise, or
economies of scale. This article presents the research
that is being carried out collaboratively between The
School of Aeronautical Engineering, Queen’s University
Belfast and the Methods-Procurement function,
Bombardier Aerospace Belfast (BAB). The research
presented, concentrates on a generic and integrated cost
estimating approach for outside production parts, and
specifically addresses machined parts which constitute
the largest portion of BAB’s outside production
spending. The main contribution of this study is the
development of a generic and hierarchical cost of
acquisition estimating methodology which facilitates
*Author to whom correspondence should be addressed.
E-mail: paul.watson@qub.ac.uk
Figures 2–5 appear in color online: http://cer.sagepub.com
from concept design to design matured current parts,
using different grades of information typically available.
After setting the context and reviewing the state of the
art in the next section, the article will go on to describe
the methodology that has been developed and will
include results for a bulkhead part family from the parts
classification tree.
2. Literature Review
2.1 Estimating Techniques and
Understanding Cost
There are two main approaches towards cost estima-
tion: cost estimation based on past experience variant
[1,2] and generative cost estimation [3]. Generative
estimating methods can be further divided into explicit
(rule-based) cost estimating, rough order magnitude
(ROM) (ratio) estimating, parametric cost estimating,
and detailed estimating using activity-based costing
(ABC) [4] and/or resource costing, each of which are
often based upon past experience. As well as these,
approaches involving the use of artificial intelligence
such as fuzzy logic and neural nets [5,6] are rapidly
developing which mimic the human thought process.
Variant (analogy) estimating [7] involves identifying
a similar part/ completed project cost and then using

Volume 14 Number 1 March 2006 17

1063-293X/06/01 0017–10 $10.00/0 DOI: 10.1177/1063293X06063424
ß 2006 SAGE Publications
18 P. WATSON
this actual cost as a basis for the estimate of the new
part/project. The ROM or ratio estimating approach is a
factor-based technique which is used to arrive at a
preliminary cost estimate inexpensively and quickly [8].
It is based upon the application of a ratio-determined
factor, from a previous contract, to a particular variable
in order to calculate the value of a second. Parametric
estimating is a technique that uses validated cost
estimating relationships (CERs) to estimate cost.
Parametric cost models [9] statistically estimate part
cost based on the correlation between historical cost
data and part properties which are considered to be
related to the cost. The ABC [4,10,11] approach
specifically aims to identify the activities of an organiza-
tion and the associated cost of each, using the activity
costs which are then allocated to cost objects. Aderoba
[12] presents an activity-based cost estimation model for
job shops which develops aggregate cost rates for
machines, labor space, and utility cost elements which
are used together with activity times to develop cost
estimates for new products and orders.
Using neural nets for costing involves the training
of a computer program given product related attributes
to cost. The neural net [5] learns which product
attributes most influence the associated cost, and then
approximates the functional relationship between the
attribute values and cost during the training. Following
which when supplied with product attributes describing
new parts, the neural net selects the appropriate
relationship function and generates the required cost
estimate. A fuzzy expert system is one that uses a
collection of fuzzy membership functions and rules to
deal quantitatively with imprecision and uncertainty
[13–17]. Authors agree that the major contribution of
fuzzy set theory is the inherent capability of representing
vague knowledge.
Each of the estimating methods can be modeled in
either a ‘top down’ or ‘bottom up’ fashion. ‘Top down’
involves the formulation of an overall estimate to
represent the completed project which may then be
broken down into subcomponents of cost as required.
In contrast, ‘bottom up’ estimating [15] generates
sublevel and component costs first which may then be
aggregated in order to produce an overall estimate.
Elements of each of these methods are more or less
applicable at various stages of the product life cycle.
2.2 Machinings Cost Modelling
Recent research has been carried out in the area of
method and tool development for manufacturing cost
estimating [9–11,15,18–24] which specifically address
different aspects of cost as well as the approaches listed.
Weustink [3] presents a generic framework for both cost
estimation and control and suggests that product costs
are caused by the following cost driving product
ET AL.
characteristics: geometry, which determines the material
quantity and machining processes required, material;
production process(es) and resources, whereby processes
are required to transform raw material into a compo-
nent and resources are necessary as consumable inputs
to the required production processes, and production
planning, which considers resource availability against
required operations in terms of timing and cost conse-
quences. A hybrid cost estimation system for machined
parts using variant and explicit rules was developed by
Arieh [21], for which the explicit cost calculations were
based on geometry, cutting tools available, and machin-
ing parameters. Arieh [21] emphasizes the importance
of cost (overhead) allocation in cost estimation although
in the hybrid method referred to address only direct
costs. An acknowledgment, however, of the importance
of costs other than direct costs was recognized.
Acquiring a detailed cost breakdown of an overhead is
quite difficult particularly in a supplier assessment
context. Hoult and Meader [19] states that, capturing
indirect costs requires an activity-based cost accounting
system. A discussion of overhead allocation is provided
by Cooper and Kaplan [25] in which overhead costs are
assigned to seven activities which include: direct labor
support overhead, machine operation overhead, setup
hours overhead, production order activity overhead,
materials handling overhead, parts administration over-
head as well as general and administrative overhead.
Even if this data were to be accessible for all suppliers,
the level of aggregation via which the data is given,
presents a challenge when trying to separate the over-
heads down to individual part level costs. Nicolaou
et al. [22] presents a method for the generation of
a mathematical model capable of estimating quality and
cost impacts of two machining operations (end milling
and drilling) for trade-off decision making. The quality
estimation model was developed using virtual simulation
and physical experimentation while cost was also
developed through an activity-based approach which
does distinguish between unit, batch, product, and
facility level activities.
A methodology for developing a parametric cost
estimating system is presented by Mileham [10] which
relates component parameters [3] such as material type,
component size and shape with cost, using heuristics,
algorithms, and expert processes. Mileham et al. [10]
states that ‘the usefulness of costing information
depends on the degree of similarity between old and
new products and the time gap between designs’. As
a result, reference is made to the use of ‘banding’ of
parts so that CERs may be developed which effectively
represent analogous part groupings instead of seeking
a single equation which would most likely fail to
represent the global parts set. The current research
suggests that the statement, ‘the accuracy of a cost
estimate improves with the volume of information
 Cost Estimation of Machined Parts within an Aerospace Supply Chain
available’ [10], is reasonable given that as the additional
information becomes available, it is possible to
further refine the ‘bands’ of parts or similar case
groups being addressed through improved classification.
Classification may be improved via refined commodity/
part coding or through the use of disaggregated cost
data. Collopy and Eames [9] extends this concept by
suggesting that the quantity of design information
available is the primary cause of the manufacturing
cost of a part and states that resulting estimates are
superior to mass-based and process-based estimates.
The above section shows that a number of cost models
have been developed for various applications utilizing
different combinations of the cost estimating techniques
available. A number of research initiatives have been
conducted involving analysis of manufacturing cost and
focusing upon cost estimating for typically a small
number of parts or instances only. This research differs
in that it has sought to develop a generic methodology
that may be readily applied to large volumes of parts
together or more refined groupings using varying
quantities of supporting information.
2.3 Procurement Context
Companies in all sectors are examining ways to reduce
costs, shorten product development times, and manage
risk. The strategic decision to ‘make or buy’ according
to Yoon [29] can often be the major determinant of
company’s profitability. The make/buy decision places
emphasis on value and affordability and as a result,
companies are increasingly turning their attention to
the wider market place for outsourcing opportunities in
their effort to streamline cost while also attempting to
focus on the development of core competencies. Once
such opportunities are identified, the subsequent trans-
actions that occur between companies (buyer–supplier)
are characterized by adding value up through the chain
and subsequent payments down the chain [18]. The
procurement process involves all activities following the
decision that a good or service is required, including
defining needs, acquisition, and disposal of goods and
services. In design and contract companies, bought-out
components account for more than 80% of total costs
[18]. For which initial implementation of supply chain
costing provides information to support reengineering
activities but when integrated with the design process
can provide improved design philosophy with cost as
a more immediate and tangible design consideration.
Cost estimating can be specifically used within the
procurement context to aid: (1) ‘cost reduction oppor-
tunity’ identification of current parts, (2) make/buy
analysis for new parts, (3) in new bid tendering, as well
as to support, (4) supply chain rationalization via
informed cost-based judgment. Cost estimating can
therefore be employed throughout the life cycle of
19
a part for current matured and new parts alike and
as such the link between design maturity and cost
committed is well recognized whereby many authors
agree that conceptual design holds the greatest cost
influence and is often irreversible [26–28]. Burt and
Doyle [26] identified that 70–80% of total avoidable
cost is controllable at the design stage. In design and
contract companies, bought-out components account
for more than 80% of total costs [18]. Hence, the early
and proactive involvement of procurement in tendering
and product design decisions is essential to reduce costs.
The integration [4,19] of design, process and cost data
requires the linkage and concurrent interaction of the
cost accounting, engineering design, manufacturing,
and procurement functions. According to Hoult and
Meader [19] the four main elements required for the
integration of design and cost are: an integrated product
process database, design system, cost modeling, and
Validation of cost models.
2.4 Summary and Challenge
Integrated parts databases are commonplace in most
aerospace primes and tend to use a code-based reference
structure for part labels which ultimately link the
available data. Variability exists, however, regarding
the quality and historical longevity of the data stored
for each of the three data types stated (design, process,
and cost). An integrated database linking design,
process/methods technology as well as costing informa-
tion representing in-house and supply chain practice
provides the platform upon which cost estimation may
be carried out and cost models built. The research
challenge in this study was to improve upon the current
practice of solely relying upon detailed or ratio-based
estimates within the BAB context. The Methods-
procurement department of BAB consists of a small
number of methods-engineers tasked with the job of
cost estimation and related activities as well as a large
number of buyers with limited understanding of the
technical backdrop of part design and inherent costing
causation. A more appropriate use of the time available
from the methods-engineers would be in targeting
cost reductions for those parts offering the greatest
return followed by validation analysis and supply chain
negotiation and cost reduction enforcement. The task of
the current research, therefore, is to develop a method-
ology that will best use the available data to generate
practical cost estimates offering satisfactory accuracy
as afforded by the available data by means of an
automated cost estimating process and thus offer a
mechanism for cost reduction opportunity identification
among currently sourced parts and for cost avoidance
in the design of new parts. The development of such
a method would result in the work time of the methods-
engineers, and in particular the detailed analysis
20
activities they employ, being better allocated to the most
appropriate studies. The basic data available for this
purpose is currently stored electronically and that which
is available in relation to the machined parts commodity
consists of; raw billet dimensions (Design data), machine
type used for the manufacture of each part as dictated
by part size (Process data), and finally previous in-house
detailed estimates of part make cycle time as well as
subcontractor make, material, and treatments cost
components. It is understood that additional part
design information for example may be used to causally
strengthen the linkage between cost driving elements to
part cost. As such the current tool has been developed to
enable application which can benefit from the use of
additional design definition if available; this in turn
provides scope for the creation of multifidelity results.
3. Methodology
The Pro-COST model incorporates the integrated
use of analogous, parametric, and ratio estimating.
Parametric estimating is suitable for this research as it
is a robust predictor and is relatively straightforward
to implement while also allowing uncertainty to be
generated within predictions affording scope for con-
fidence, sensitivity, and risk analyses. In this study,
parametric relationships are developed which link part
attributes to production cycle time. Ratio estimates
are used to determine both manufacturing rate and
treatments cost components when little specific/detailed
supplier costing data is known. In such cases, analogous
classification must be adopted in order to be able to
Figure 1. Parts classification tree depicting the breakdown of outside production parts.
P. WATSON ET AL.
band parts of similar nature and proposed similar cost
bands together. It is recognized that, if disaggregated
rate cost data is known then the rate cost factor used
in the make component calculation (make cost ¼ cycle
time
rate cost), may be further divided into its direct
and indirect components thus providing grounds for
a more detailed and accurate estimate.
3.1 Cost Components
The Pro-COST model focuses on acquisition cost,
in this case of outside production machined parts.
Via trade study questionnaire and internal expert
opinion, the current research has shown that unit cost
may be divided into three main components; make,
material, and treatments costs giving:
X X X
Unit Cost ¼ Make Costþ Material Cost
X
þ Treatments Cost ð1Þ
Based upon a 25% questionnaire return volume,
having circulated the questionnaire to 24 Bombardier
machining related contract companies, make cost is the
most significant cost carrier, holding between 40 and
70% of part cost, followed by material 30–40%, and
treatments cost 10–20% respectively. Figure 1 shows
how the outside production parts grouping is broken
into its sublevels using: commodity, material, material
type, material form, and part and process family.
Machined parts account for 55% of total outside
production spending. It is for this reason that the
 Cost Estimation of Machined Parts within an Aerospace Supply Chain
machinings commodity was selected as the commodity
upon which to primarily base the study.
Make Cost (fabrication cost) is dependent upon
process, material, tolerance, feed and speed rates,
loading and batch sizes, etc. In this study make cost
comprises of two elements: machining cycle time and
manufacturing rate cost. Machining cycle time is defined
as the run time required to complete one unit after the
set up work has been completed. Manufacturing rate
cost is a measure of the direct and indirect cost incurred
per unit period of production. When considering hourly
production rate cost, the key issues that must be
understood are overhead allocation concerning expen-
diture, estimate of productive hours as well as the level
of aggregation for which a particular cost estimate is
being generated.
Assumptions in relation to quantity, material size,
and material specifications are involved in estimating
material costs. Material Cost refers to the cost of the raw
material required which relates to size and additional
cost elements such as handling and cutting charges if
necessary for a particular order. Figure 2 presents a flow
chart which describes the material costing approach.
Material cost estimating for this model is highly dependent
on BAB contracts already in place. These provide
MATERIAL COSTING
Procurement database
Select material type
Select material code
Select part type
Identify supply base
Is there a BAB
No Supplier negotiations are
contract in place for this material type carried out on an
and size requirement? individual case basis
Yes
Calculate material cost =
volume x material rate
charge per unit volume
(contract dependent)
Figure 2. Material component costing approach.
Figure 3. Bulkhead beam on forward pressure bulkhead. [Image is
property of Bombardier Aerospace Belfast (Research Partner)].
21
material rate (£/unit mass) cost figures which may be
used together with material density and material order
volume to calculate the material cost. Comparison of
material trade indexes for a particular order volume
with a consideration of standard cutting and handling
charges provides a means of assessing current contract
value. Many treatments are available in aerospace
manufacturing for which detailed costing presents a
considerable challenge. As with rate cost development,
an activity-based approach may be employed for
treatments cost estimation which looks to establish all
processes and consumable resource requirements before
allocating cost to particular cost centers. However, this
would prove to be quite a labor intensive process requiring
a very refined level of disaggregated costing data which
would most certainly not be available in the procure-
ment outsourcing context. It is for this reason that an
ROM (rough order magnitude or ratio-based approach),
which relates treatments cost by ratio to fabrication cost
using historical subcontracted actual and treatments
costs, is being used, the premise being that parts
similar in nature require similar treatment processes
and therefore incur a comparable treatments cost.
3.2 Data Classification and Method Application
The principle of analogous classification is a key
aspect of the methodology and was implemented to
define families of parts. Part families are used which
contain parts that are similar due to size, geometric
shape or the similar processing steps required in their
manufacture. As intimated earlier, refined classification
is likely to result in improved model accuracy as the
chosen cost drivers are much more likely to be common
to all the parts in the family. There is an obvious trade-
off here in terms of increasing the complexity through
the number of CERs embodied in the costing frame-
work (that which reflects all part groupings within
the machining commodity) and the potentially ever
smaller improvement in accuracy. Each lower level of
classification not only facilitates increasingly refined
clustering of parts which generally results in improved
parametric result accuracy but also permits ratio
estimates for make rate and treatments costs to be
calculated. On interviewing a number of process experts
and through examination of machined parts’ bill of
materials, the following degree of classification was
developed:
1. Aircraft type: Mission/size/ etc.
2. Contract: Fuselage/nacelle/control surfaces
3. Commodity: Machinings/sheet metal/etc.
4. Material & type: Aluminum/steel/titanium/etc.
5. Material form: Forged block/plate/rectangular bar/sheet
6. Process: Size/capability/etc.
7. Part family Size/shape/processing steps required
22
Table 1. Breakdown of unit cost components.
P P
P Make cost þ
Unit cost ¼
(a) Base level
method CTan-para
RateROM-ag
Data Analogous classification
parametric: L, W, T þ additional
when available
The above qualifiers can be viewed as defining the
cost range so that typically, specific cost drivers can
now be identified and related to cost by a suitable
technique. Primarily, at this level of distinction, it is
paramount to choose part attributes that have been
closely identified as driving manufacturing cost.
However, it is also important to choose attributes that
are readily available and defined at whatever stage of
the product life that the estimating module is to be used.
In machinings manufacture, as material removal is
a necessary step, it is reasonable to use part geometry:
length, width, and thickness as the base level variables
which drive cycle time duration. When applying the
method to other commodities, normalization must be
applied to the IPPD database to identify the ‘genetic-
causal’ cost drivers for the new part types followed
again by part family classification before application
of the automated estimating tool.
Table 1 provides a breakdown of unit cost compo-
nents, method appropriate to the estimation of each as
well as the data required to supply the estimating
method listed. Most scope exists to impact the make cost
estimate which in turn is the component which carries
the largest proportion of unit cost. The application of
the material cost calculation as well as the treatments
ROM are self-apparent from the data table shown.
The multiple linear regression (MLR) facility within the
MS Excel is used in the development of parametric cycle
time estimates, generating equations of the functional
form:
Dependent variable estimate ¼ Coefficient1 CD1
þ Coefficient1 CD2
þ Coefficient1 CD3
þ constant
Fabrication make cost is then derived via the
application of a fabrication rate cost. The aggregated
overhead rate, incorporating both direct and indirect
cost, is developed as per Equation (2) using a case
by case ROM allocation and reflects the fact that in
most instances insufficient costing data is supplied by
subcontracted companies to facilitate detailed or dis-
aggregated rate cost analysis. Equation (3) is used for
P. WATSON ET AL.
P
Material cost þ Treatments cost
V
MTLRATE TROM
ROM Part dimensions: L, W, T for ROM
SUBCON MK SUBCON TR
CTPARA volume material density
and ShC MK
For all parts material rate cost from trade For all parts
in grouping supply index in grouping
each analogous band of part whereby the rate cost
ROM is calculated as the ratio of total subcontractor
make cost for all the parts in a grouping divided by the
total cycle time to process each of the parts.
Subcon Make Cost
ROM1 , RATE COSTð£=HRÞ¼ ð3Þ
Para CT
3.3 Parametric Method
The developed tool has been coded as an Excel
add-in*.xla file which appears as a drop-down menu
within the Microsoft Excel Windows environment and
uses some already present MLR functionality from the
Data Analysis ToolPak. Upon selection from the menu
the user is initially provided two options: to either
include or exclude outliers in the following analysis.
The integrated parts base has been developed within
Microsoft Access and upon construction of an appro-
priate query, a data table may be extracted and
formatted for use within Excel. After part family
classification and following initial analysis option selection
a window appears prompting the user to indicate which
columns in the related part family data table contain the:
independent, dependent, part code, process, and sub-
contractor cost variables. After inputting the column
labels and selecting ‘OK’, the program runs and
generates the optimal CER for this data grouping and
in addition provides a statistical summary of the quality
of the result as well as a calculator-type screen in which
the user can input new part dimensions, generate
deterministic estimates as well as confidence intervals.
Functionality developed and used within the add-in
includes:
ð2Þ
. Multivariate outlier check based on Cook’s distance.
. Best-subset regression in conjunction with a multi-
collinearity check based on the associated average
and maximum variance inflation factor for
a given parameter subset. From this, three subsets
which satisfy the multicollinearity test and which
have the highest adjusted R2 values (variance
represented selected) are carried through for further
analyses.
 Cost Estimation of Machined Parts within an Aerospace Supply Chain 23

. Multilinear regression is then employed to generate 1.2

a relationship for each of these three cases following
1 0.99
which a practical prediction error assessment is 0.905
carried out comparing actuals to the estimates 0.8
0.743
generated from each of the three relationships. The 0.6 0.598
one with the lowest root mean square error (RMSE)
0.4
value is selected as the optimal relationship. 0.329
. Ordinary least squares assumption checks (visual 0.2
plots generated). 0 0.0076
. If the optimal relationship passes the assumption 3 Variables All variables All var. OL removed
checks then the confidence limit mechanism is Adjusted R2 RMSE (h)
generated and the final ‘Calculator Sheet’ output
Figure 4. Regression relationship adjusted R2 and RMSE compar-
with descriptive summary data. ison using different quantities of independent information.
. The calculator sheet allows the user to enter new
parts dimensions and immediately have part make
2
cost, confidence bands as well as material and
1.8

Standardized cycle time

treatments costs calculated. 1.6
1.4
The tool is dynamic in that it can be used to identify 1.2
1
the optimal relationship for any parts grouping regard- 0.8
less of number of records within the group and for 0.6
up to 10 independent design variables. It is worth 0.4
0.2
noting that the tool has been designed to replicate the
0
detailed estimating approach and with sufficient data 1 3 5 7 9 11 13 15 17 19 21
yields results with only marginal differences. The tool Part number
therefore reduces the time to develop such estimates Actuals All variables, outliers removed
considerably. All variables Three variables
Figure 5. Standardized cycle time estimate comparison.

4. Results
The machinings commodity costing framework of
relations consist of 82 CERs, 61 representing prismatic
parts which account for 79% of the machinings parts
base and 21 for extruded parts which account for
12%. The remaining 9% comprises both rejected and
miscellaneous (non-coded) parts. The simplifying
assumption adopted is that of considering only
those parts which are manufactured using one part
per billet. The CERs developed will give complete
representation of the selected 91%, at differing
levels of distinction using the qualifiers described, ‘top-
down’ from the total machinings group size of 2398
records.
In order to highlight the capability of the tool,
regression relationship results for the parametric cycle
time component of acquisition cost will be compared
below in Figure 4 for the bulkhead beam part family
in terms of variance represented using Adjusted R2
and predictive ability with the RMSE. Estimates
generated using raw billet length, width, and thickness
as independent variables are compared against actual
detailed estimates as well as those generated using
additional design data: net billet length, width thickness,
raw billet volume, net billet volume, part volume, and
part wetted area.
It can be seen that the variance represented rises from
0.743 using only the base level billet dimensions to 0.905
when using all available design data and then to 0.99
upon removal of 4 outliers, as deemed by performing
a Cook’s distance calculation. Correspondingly, the
RMSE associated with each improves with greater
facilitating data as well as improved classification.
The original group count of 21 dropped to 17 after the
outlier removal. Figure 5 compares the standardized
estimates generated using each quantity of input
information for the parts in this bulkhead beam group-
ing. Cycle time estimates are standardized to the actual
values.
Therefore upon costing a new part, the user should
avail of all facilitating data in selecting where the
part belongs in the classification tree and in building
the relationship. It should be noted, however, that
a particular level of accuracy cannot be forced but
instead the nature of the data as well as the degree of
classification used, strongly determines the accuracy
achievable for a particular subset. It has been shown
that optimal results may be developed when detailed
part classification, best subset selection of cost drivers
and regression variance accountability are each
used together in conjunction with prediction error
assessment.
24 P. WATSON
5. Conclusions
The purpose of incorporating improved estimating
methodologies within procurement is essentially to
provide additional information against which sourcing
issues may be more readily considered. The main
conclusions of the current research are listed below:
. A cost estimating methodology using analogous
classification, parametric trending and ratio estimat-
ing has been developed for outside production parts
and a hierarchical costing framework for machinings
costing is currently under development.
. The approach looks to establish value, attribute
appropriate cost, and avoid wastage in sourcing
related activities. The purpose of developing such
a procurement model is essentially to provide
additional information against which sourcing issues
may be more readily considered.
. The hierarchical approach considers how the global
group of machinings parts is divided into inter-
mediate levels and subgroups using part characteristic
descriptors and is applied in the direction of
improved classification.
. A costing framework has been adopted instead of
seeking only a single equation which would fail
to adequately represent the global parts set. The
framework will afford complete representation
of the machinings commodity utilizing differing
degrees of data input and therefore the automated
estimating method may be applied at concept design
stage or to current parts for the purpose of cost
avoidance or identifying potential cost reduction
opportunities.
The main deliverable is that a hierarchical approach
to acquisition costing analysis may be accomplished for
large volumes of purchased items. The method facilitates
the use of different grades of part attribute data. The
estimates generated provide the procurement buyer with
a real ‘feel’ as to the validity range of an estimate
ultimately enabling a more knowledgeable discussion
of sourcing issues on cost grounds with both current
and potential supply chain partners.
Nomenclature
CER ¼ cost estimating relationship
CTPARA ¼ parametric estimate of cycle time (h)
MTLRATE ¼ material rate cost per unit mass
(£/kg)

¼ material density (kg/unit volume)
RateROM-ag ¼ aggregated make rate cost (£/h)
ROM ¼ rough order magnitude
ET AL.
ShC_MKag ¼ make should cost using aggregated
rate cost data (£)
SUBCON_MK ¼ subcontracted part make cost (£)
SUBCON_TR ¼ subcontracted part treatments
cost (£)
TROM ¼ treatments ROM
V ¼ part volume (in.3)
Acknowledgment
The research presented is the result of a collaborative
study between Queen’s University Belfast and
Bombardier Aerospace (Methods-procurement), as
such the QUB authors would like to thank those in
Bombardier Aerospace who continue to provide both
necessary data as well as constructive guidance.
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of Salford, 2: 92–101. his final year of a PhD in Cost
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Engineering, Queen’s University
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Foundations and Industrial Applications, International of Belfast. He attained an
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Publishers. Honours in 2002 with the
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and its Applications, Academic Press, Inc., Orlando, FL. region of two years industrial
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to Order Manufacturing, International Journal of
Production Economics, 65(2): 179–190. with Seagate Technology, Du Pont UK Ltd. and Mars Ltd.
19. Hoult, D.P. and Meader, L. (1996). Methods The PhD itself is an industrial research program which is
of Integrating Design and Cost Information to being carried out in conjunction with Bombardier
Achieve Enhanced Manufacturing Cost/Performance Aerospace Shorts. The research program has afforded the
Trade-offs, In: SAVE International Conference opportunity to examine engineering-based and commercial
Proceedings. issues together within a Methods-procurement context. His
20. Weustink, I.F., Ten Brinke, E., Streppel, A.H. and research interests in the area of cost engineering include
Kals, H.J.J. (2000). A Generic Framework for Cost
Estimation and Cost Control in Product Design, estimating and forecasting for manufacturing, design,
Laboratory of Production and Design Engineering, procurement and supply chain applications.
University of Twente, The Netherlands.
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Parts, International Journal of Production Research, Dr. Ricky Curran (Senior Lecturer)
38(17): 4481–4494.
22. Nicolaou, P., Thurston, D.L. and Carnahan, J.V. (2002). Dr. Ricky Curran graduated
Machining Quality and Cost: Estimation and Tradeoffs,
Transactions of ASME, 124: 840–851. from Queen’s University in
23. Curran, R., Kundu, A., Raghunathan, S.R. and 1990 with an Honours Degree
McFadden, R. (2003). Influence of Manufacturing in Mechanical Engineering
Tolerance on Aircraft Direct Operating Cost (DOC), and returned to the School of
Journal of Materials Processing Technology, pp. 239–247, Aeronautical Engineering from
Elsevier Science BV, ISSN; 0924-0136. 1992–1995 to complete his
24. Curran, R., Rothwell, A. and Castagne, S. A Numerical PhD in air turbine design for
Method for Cost-Weight Optimisationof Stringer-Skin
Panels, In: Proceedings of the 45th AIAA Structures ocean wave energy converters.
Conference, Palm Springs, USA. His current research interests
25. Cooper, R. and Kaplan, R.S. (1998). The Design of are focused on engineering
Cost Management Systems– Text and Cases, 2nd edn, cost modeling; aircraft systems
pp. 227–231, John Deere Component Works (A) integration; design for manufacture (DFM);
(Abridged Case), Prentice Hall. and technology transfer. He has over 70 referred
26. Burt, D.N. and Doyle, M.F. (1993). The American publications and is the Chair of the Aircraft
Keiretsu, Business One, Homewood, Irwin, IL.
Integration and Cost research group within the Centre
27. Rush, C. and Roy, R. (2001). Capturing Quantitative
& Qualitative Knowledge for Cost Modelling within of Excellence for Integrated Aircraft Technologies
a CE Environment, In: ISPE International Conference (CEIAT) at QUB. He is General Secretary of the
26 P. WATSON ET AL.

International Society For Productivity Enhancement the development of tools for the stability analysis
(ISPE); on the Technical Committee of the International of aerostructures and the integration of structural
Society of Offshore and Polar Engineering (ISOPE); and and manufacturing analysis for detailed design.
is a member of the Economics Technical Committee
of the American Institute of Aeronautics and Mr. Stephen Cowan
Astronautics (AIAA) and AIAA Conceptual Design Stephen joined the company
Working Group. He is a member of American Institute in 1987 as a Manufacturing
of Aeronautics and Astronautics (AIAA), the UK Royal Engineer and was part of the
Aeronautical Society (RAeS) and the International team that experienced the
Council on Systems Engineering (INCOSE). introduction of CAD CAM
and Digital technology and
Dr. Adrian Murphy (Lecturer) the transition of the company
from the public to the private
Dr. Murphy graduated from sector. He then held various
the School of Aeronautical roles within the Fabrications
Engineering, Queen’s Univer- division and attained Methods
sity Belfast, in 1997, and Manufacturing Manager in the
Cranfield University in 1999 early 90’s. In 1997 Stephen joined the Procurement
after completing his master’s division as a Vendor Manager for New Business
degree in Aerospace Vehicle introduction and in 2004 was appointed Sourcing
Design. He returned to Manager for the Belfast site with Bombardier Group
Queen’s to undertake a PhD Commodity responsibility, spending in excess of $400M
in 1998 and in 2001 was across 600 Vendors with over 140 personnel. In 2005
employed as a research Stephen was appointed Director of Material Logistics
assistant. In 2002 Dr Murphy and Sourcing responsible for over 430 personnel from
joined the teaching staff of the school after completing Master Scheduling, Inventory Management, Planning,
his PhD and his current research interests include Stores and Purchasing etc.