Orange County Convention Center Orlando, Florida | June 3-5, 2014

Strategic Product Development and Cost Estimates for Futuristic Products Vedant Borse (HCL AXON)

Understand Product Costing and Challenges with estimating cost of Future Product

Eliminate Manual/ Excel based calculations and reduces the risk of estimation variance

Closed loop Solution Approach for accurate Product Costing, Planning and Execution

LEARNING POINTS

How do I estimate Cost?

Detailed Level Estimates BOM with Detailed Part List

•Travel •Freight •Contract

•Labor •Vehicle •Parts •Test Cost Manpower

+

Executive Advance Planning Departments/ Project

- 6Years - 4Years - 3Years

High Level #1 Estimates Buildable Combinations Matrix (BCM)

•Travel •Freight •Contract

•Labor •Vehicle •Parts •Test Cost Manpower

+

• Development Complexity Known • Feature List Unknown • Parts List Unknown

High Level #2 Estimates Features and Parts List (High Level)

Features List

•Travel •Freight •Contract

•Labor •Vehicle •Parts •Test Cost Manpower

+

• Feature List Known • Parts List Partial • Development Complexity Calculated

• Parts List Known • Feature List Known • Development Complexity Calculated

Reduce Estimation Accuracy to: +/- 5%

Reduce Estimation Accuracy to: +/- 0.5%

Challenge 1: Varying YoY Cost Estimates

-10%

-5%

0%

5%

10%

15%

20%

0

50

100

150

200

250

300

Year 6 Year 5 Year 4 Year 3 Year 2 Year 1 Actual

Cost

Variance

Cause Development Assumption Not Clear in Early Stage Estimator include Buffer in budget Detail Spending Is not clear

Sample Lifetime Cost History for a Single Vehicle Development Estimates

Variance

~20% Variance

Year on Year Estimation Est. Vs Actual

~5% Var.

Challenge 2: High Consolidated Variance

(80.00)

(60.00)

(40.00)

(20.00)

-

20.00

40.00

60.00

Year 6 Year 5 Year 4 Year 3 Year 2 Year 1 Actual

Product F

Product E

Product D

Product C

Product B

Product A

Total Variance

Issues Poor Estimation Accuracy occurs in all projects. Poor Spending Control occurs in all projects.

Year on Year Estimation Est. Vs Actual

Actual

No Part List/ BOM data results in to estimate cost Long estimation process Varying range of complexities, type of development, its flow, duration, etc leads

to hundreds of permutation and combination to estimate a product cost for Labor, Parts, Products, Design, Build, Test, Prototype Cost, Whitebody, etc.

Unclear varying factors forces use of weak resource estimates technique resulting in Inaccuracy in Project Resource Planning for future Products (Eg. 20% avg. variance/Prj )

Shorter time to market and increasing variant launch (Minor Model, Major Model, NPDI) adds to more pressure on estimates and product development, resulting in incorrect estimates

Use of custom tools or Excels adds difficulty in collating estimates from multiple business units

Unavailability of robust estimation technique limits alternatives/ estimates scenarios (Eg. 3/Prj), thus Limiting alternatives/ estimates scenarios for Lineup Planning of multiple vehicle and multiple launch years projects

Future Product Cost Estimates Challenges

Microsoft Excel

Custom Home Grown Solution MS Access Highly customized PLM Solution

Guestimates/ Person Dependent

Current Estimation Tools

Varying Year on Year costing estimates results in Bad Image to investor

More reporting requests, thus requiring large pool of planning resources required for estimation and report preparation

Inability to created multiple estimates scenarios for each vehicle, while creating single lineup for all vehicles across globe for each variant becomes distant possibility

Consequence

HCL AXON PLM Practice

• Resource expertise in SAP PLM

PLM Highlight: Leader in SAP PLM Implementation (12+ years practice, 40+ implementation) HCL AXON has amongst the highest number of PLM client references SAP PLM/PPM Practice COE’s in US, Asia and Europe

Unique Industry Specialization: Pharmaceuticals, Consumer Healthcare, Consumer Packaged Goods, Discrete Manufacturing and Professional Services. Delivered the

largest PPM user in Pharma and the most complex project in CPG

Platform Pioneer Developed an accelerator for PLM/PPM in Consumer Healthcare First SAP partner globally for the Rapid Deployment Solution (RDS) of Portfolio and Project Management (SAP PPM) SAP partner globally for the Rapid Deployment Solution (RDS) for Visual Enterprise (VE) SAP Ramp up Partner with dedicated SAP PLM Lab (PPM 6.0, PLM 7.0)

SAP Endorsement Co-authored R&D whitepapers with SAP More Sapphire conference success stories than any other partner Top collaborator with SAP for PLM in Life Sciences

Manufacturers pursuing integrated PLM/MES/ERP environments in HCL's primary industries - particularly those with SAP as their ERP platform - should consider HCL for PLM services.

“

Solution options Easy Cost Planning PDCE iPPE BOBJ PCM

Criteria No Material Master, varying range of complexities, type of development, its

flow, duration, Show possible permutation and combination Calculate 2.5 Billion data combination and generate results for

Cost: Labor, Parts, Products, Design, Build, Test, Prototype Cost, etc.

Quantity: Manpower, Products, BOM/MM, etc

Solution Options

Combination of Process improvement with enablement via right technology should be the mantra

Build a closed loop estimation process

Closed loop Solution: SAP PPM+PCM+ECC

f(x)

Approval Workflow

PCM Profitability & Cost Management

PPM Portfolio & Project Management

Project Execution

Financial Time Reporting

Features and Parts

Project System

Project Highlights

First PPM-PCM Integration First Unified UI Integration First PCM-BODS-PCM Real-

time Integration

Automotive Estimation formulas are very complex They involve varying parameters

Type of development (Minor Model, Major Model Change MMC), Full Model (FMC) or New Product (NPDI))

Varying range of complexities (Carryover, Modify, New) Build Lot (Stages of Development) and duration Development flow Departments (Body, chassis, Interior, Electrical, Transmission, etc

While estimating the process Crash test vehicles has further complex dimension

Every Company has a complex formula for estimation N_Motor CFM: Common Module Family F_Motor BCM: Buildable Combinations Matrix T and Y Motor has similar methods

Define Formula

BOBJ-PCM Formula and Lookup

Super User can control Formula Tables, Condition to

apply specific Table, Structure of Table and Formula

Build Estimation Projects Extent Project for Next Levels of Estimation Extent Estimation Project to Execution Project Variance Analysis between estimates and Actuals to

improve the formula via a Closed Loop process (PCM-PPM-ECC Integration)

Build a Lineup view of all the projects stacked together

Define Project and Lineup

Project Planning and Estimation Inputs

Calculation in PCM

Underlying Calculation in PCM from inputs from PPM

Rollup Estimation to Project and Lineup

Lineup Summarization

SAP Implementation (Old vs New) N

ew S

yste

m (S

AP

) O

ld S

yste

m (M

anua

l)

Resource Estimation and Formula

Project Resource Estimation

Lineup Scenario Resource Simulation

Financial

Manual Process

Project Estimates

Project Lineup

f(x)

Approval Workflow

PCM Profitability & Cost Management

PPM Portfolio & Project Management

Project System

Project Execution

Financial Time Reporting TTP Project

Benefits -Improved Accuracy from 20% to 5% due to formula PDCA -Best Decision Making due to Alternatives: 3 scenarios to10 scenarios - Huge Annual Saving in terms of Estimation House and Cost

Issues: -Manual Repeat process -Low Accuracy -More Efforts

Timesheet

Calculation via spreadsheets

Calculation via spreadsheets

Parts System

Parts System

High Efforts/ yrs for Estimation

Lower Simulation/ Project

High Efforts/ Project for Estimation

Higher Simulation/ Project

Lower Efforts/ Project for Estimation

Better Planning decisions, by providing: More accurate estimates. Accuracy improvement from 20% avg./Prj → 5% avg./Prj

(If condition change, clear analysis reasons) More lineup alternatives. Increase Alternatives from: 3 scenarios→10 scenarios

Time Saving

Forecasters time: 130hrs/Prj→10hrs/Project (About $0.4M Saving)

Benefits

THANK YOU

THANK YOU FOR PARTICIPATING

Vedant Borse Solution Architect, PLM / PPM / PCM

HCL AXON EAS Division – HCL Technologies

15 Exchange Place, Suite 730, Jersey City, NJ 07302 Mob: +1 919 744 6166

www.hcl-axon.com www.hcltech.com

www.hcl.com

HCL Booth #213