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A project focused on reducing SKUs of forging parts, aiming to identify cost drivers and develop costing systems for application guidelines. Includes methodology, statistical analysis, recommendations, and learnings from India and TVS.
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Cost Based Decision Support System Development Project 4 Xiaochang Li Masaki Watanabe Purdue University
Project Team • Mentor • Mr. KN Swaminathan • Mr. Richard Gomez • Member • Masaki Watanabe • Purdue MBA Student • 6 years working experience at Nissan • Xiaochang Li • Purdue undergraduate student • Major in industrial Engineering
Project overview • Project Objective • Reduce SKUs of target parts • Scope • Forging parts • Deliverables • Identify cost drivers • Develop objective costing systems • Arrive at guidelines for application
Agenda • Introduction • Definition for SKU • Benefit of reducing SKU • Competitors’ solutions • Methodology • An example of crank pin • An Example of connecting-rod • Statistical results and analysis • Standardization guideline • Recommendations • Guidelines for reducing SKU • Alternatives for reducing SKU • Learnings from India and TVS
Introduction • What is SKU? • Stock Keeping Unit • Defined as an unique identifier • Why reduce SKU? • Easier data acquisition • Savings on engineering cost and lead time • Reduction on quality problems
What competitor is doing Change to Port Injection 39.0x41.4 (49cc) Carburetor, 3 speed Kick start 39.0x41.4 (49cc) Port Injection, 3 speed Kick start Bore up Change to Self Start Change to 4 speed 39.0x41.4 (49cc) Carburetor, 3 speed Self start 47.0x41.4 (72cc) Carburetor, 3 speed Kick start 39.0x41.4 (49cc) Port Injection, 4 speed Kick start
An Example of Crank Pin Data Table 1
How to identify key parameters • Basic Criteria • Look at dimensions with tight tolerances • Record parameters when • Share interface with other parts • affecting the functionality of engine • special treatment is applied • Always record weight
Cost Objective Function Derived from the previous step
Adjustment of Trend Price= - 72.9 + 0.000017 Volume + 4.22 Diameter Adjustment Amount = Actual Price - Theoretic Price = 31.93 – 32.61 = -0.68 Adjusted Price= - 73.58 + 0.000017Volume + 4.22Diameter
Criteria for Standardization • Purpose: find similar parts and do standardization • Two approaches to follow • Look at all parameters • Identify significant parameters by engineering knowledge • How to do standardization • Eliminate parts with low production volume • Standardization by looking at the cost drivers
An Example of Connecting-Rod Data Table 2
Input Material Cost Input Material Cost = 0.04 Rs/g * Input Material Weight Input Material Weight = Final Parts Weight * Ratio Final Pats Weight = f(Specification of Parts) Ratio = f(Specification of Part) Final Parts Weight = - 127 + 3.57 BE + 0.847 L + 3.99 W Ratio = 5.61 - 0.142 W
Recap of Scrap Recap of Scrap= 0.012 Rs/g * Scrap Weight Scrap Weight = f(Input Material, Parts Weight) Scrap = - 44.0 + 0.906 *(Input Material – Parts Weight)
Conversion Cost Conversion Cost= f(Parts Specification, Production Volume) Conversion Cost = - 34.1 + 2.46 SE - 3.06 W + 0.125 L + 27.1 BE/SE - 0.000005 Volume Adjusted Conversion Cost = - 34.55 + 2.46 SE - 3.06 W + 0.125 L + 27.1 BE/SE - 0.000005 Volume
Recommendation • Guidelines for designers • Make new model by modifying current parts • Consider the cost drivers when designing • Standardization on varieties with small volume • Standardization on varieties with large fixed cost • Standardization based on engine model
What else we can do • To Reduce Part Cost • Increase flexibility of machines and operators • Reduce fixed cost in production • To shorten R&D Lead Time • Develop e accelerated evaluation method • Collaborative R&D with suppler and manufacturing
What we have learned • From India • Outstanding engineering education • Abundant manpower • Ambitions to dominate the world market • Beautiful palaces • Animal friendly city • Friendly people
What we have learned • From TVS • Awareness of environmental conservation • Company Society Responsibility (CSR) • Ambitions and actions to learn, change and take risks • Team spirit
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