Supply Chain Management Through Cost Modeling
In this paper the authors present a framework for managing the supply chain through cost modeling.
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Authored By:
Alan Palesko
SavanSys Solutions LLC, Dallas, TX, USA
Chet Palesko
SavanSys Solutions LLC, Austin, TX, USA
Summary
Demands on the electronics industry for smaller, faster, and cheaper boards have made the supply chain more complex. Outsourcing, new technologies, and increasing performance requirements make designing and building the right product for the right price more difficult than ever.
We will present a framework for understanding and managing the supply chain through cost modeling. Cost models that accurately reflect the cost impact from technology and design decisions enable a more precise understanding of supply chain behavior. Cost models can show the extra cost of adding a layer, the expected savings from relaxing design rules, or the cost of lead free processing compared to non-lead free processing. The models also provide context to understanding the "should cost" of a product and the path to achieving it.
Since the guidance from cost models is based on the true supplier cost drivers and pricing behavior, designer cost reduction efforts will result in higher savings compared to not using the cost models. Without cost models, designers risk missing suppliers real cost drivers and, therefore, the opportunity to decrease cost.
This cost modeling framework allows the designers to realize the lowest cost product by matching the right design with the right supplier. It is a method for understanding a design decisions cost impact: a design change, a supplier change, or even the impact of new technology
Conclusions
Supply chain cost modeling enables designers to realize the lowest cost product by matching the right design with the right supplier. Cost models that accurately reflect differences and the underlying supplier cost drivers enable better decisions early in the design process.
These cost models have the following three major benefits to reduce product cost.
1.Designers make better decisions about technology and design characteristics.
2.Suppliers influence early design choices to match their core competencies and abilities.
3."Should Cost" models throughout the design process insure there are no cost surprises at the end of the design cycle
Initially Published in the SMTA Proceedings
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