Siemens 9 10-final_version_sould_costing_webcast_4_3

© 2014 IHS
Information | Analytics | Expertise
COLLABORATING WITH SUPPLIERS
Where "Should Cost" Fits in the Equation
SEPTEMBER 2014
Katie Tamblin, Director, Supply Chain Solutions, IHS
+44 203 159 3377
Katie.Tamblin@ihs.com

© 2014 IHS
IHS INDUSTRIES
3
ABOUT IHS
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© 2014 IHS
Recognized by World-Class Leaders

© 2014 IHS
Understanding Should-Cost
•What raw materials drive your suppliers’ costs?
•Is the price your supplier quoted fair and sustainable?
•How can I use should-cost estimations to my advantage?
5
Fastener Manufacturing: Prices versus Costs

© 2014 IHS
Buyers
Sellers
Neutral
6
Current pricing environment is mostly favorable to buyers
Chemicals
Steel
Nonferrous Metals
Precious Metals
Category
Buying Strategy
Notes
Equipment
Plastics
Wait
Buy Now
Energy savings yet to filter down
More attractive next quarter
Chinese prices nearing bottom
Certain metals are attractive
Recently settled labor disputes should help guide prices lower
Prices remain low
Buy As Needed
Buy As Needed
Buy As Needed
Buy Now

© 2014 IHS
North American Steel
Demand
+Demand is growing at solid, albeit unspectacular, rates. Vehicle sales and construction activity have both rebounded sharply following a slow start to the year
Supply
-Supply remains ample across product categories
+Trade cases continue to cast a shadow over the industry, with a final review on oil country tubular goods (OCTG) expected sometime in the next two months
Prices
•Prices for plate and special quality bar remain unattractive, while sheet and pipe prices favor buyers. Supply disruptions next year will drive prices for most products higher
7
Current pricing generally favors buyers but conditions are shifting
Buying Environment
Next Quarter (2014Q4)
Next Year (2015)
Worse
Worse
550
600
650
700
750
800
850
2011
2012
2013
2014
2015
2016
Prices look attractive for now
Hot-rolled sheet, dollars/short ton
Rebar, dollars/short ton

© 2014 IHS
IHS Forecast Accuracy: U.S. Steel Price
8
0
200
400
600
800
1000
1200
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Actual
Forecast
Spot Price for Coiled Plate
($/ton)
One-Year Forecast - from 1995 to 2013Average Error ($/ton)16.56Average Absolute Error ($/ton)55.94Accuracy Rating91%

© 2014 IHS
Summary
•Consistent, transparent strategies for supplier collaboration
•Best practice to understand should-cost
•Most efficient way is to outsource forecasting to ensure consistency, accuracy, and visibility
•Forecasts can be incorporated into toolsets in order to accurately assess and plan for product lifecycle management
9

© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at customercare@ihs.com, +1 800 IHS CARE (from North American locations), or +44 (0) 1344 328 300 (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners. V2.0-29.04.14
Americas: +1.800.IHS.CARE (+1.800.447.273); customercare@ihs.com
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Contact us
Thank you!

Unrestricted © Siemens AG 2014 All rights reserved.
Siemens PLM Software
Collaborating with Suppliers - Where ”Should Cost” Fits in the Equation
Rohit Tangri, VP, Teamcenter Product Management, Marketing & Business Development, Siemens PLM Software

The imperative for should-cost
Key challenges
Manufacturers
need high
degree of cost
transparency
Short product
lifecycles,
complex
product
structures
Quick
availability of
reliable cost
estimates
„Spreadsheet errors have
been going on for years
with impacts in
BILLIONS... IT HAS BEEN
estimated that 88% of
spreadsheets have some
sort of error in them”.
(Source: CNBC; F1F9)
Frequent
product and
process
innovations
High
competition
and cost
pressure

Teamcenter Product
Cost Management
Typical
situation
Database
Transformation to an integrated solution
Situation/Complication
• Many disconnected spreadsheets
• Poor integration to other systems
• No infrastructure for sharing data and costing knowledge
• No standardized costing methods and inconsistent data
• Cost figures neither repeatable nor comparable
• Inefficient costing processes and low transparency
• No systematic tracking and optimization of product
costs
Solution
• Platform to manage cost knowledge and consistent data
• Fact-based and cost-driver-transparent calculations on
cost methods and models
• Cross-functional collaboration & communication with an
integrated solution

Methodology
• Overhead calculation
• Bottom-up costing
Cost Modeling
• Bill of Material (BOM)
• Bill of Processes (BOP)
• Material parameters
• Process parameters
• Overheads
Output
• Cost roll-up
• Processes / Products
• Assemblies / BOM / Parts
• Cost compositions
• Reports
Flexible costing based on bill of material & bill of processes
Methodology of flexible bottom-up costing
Material
Overhead Costs
Residual Mfg.
Overhead Costs
Raw Material
Raw Parts
Manufacturing
Step n
Geometry/ Volume
Materials
Tolerance/PMI
Bill of Material
(BOM)
Predictive VE
Should cost
Tool
Set-up
Machines
Labor
Process
Manufacturing
Parameters
Manufacturing
Step 1
Tool
Set-up
Machines
Labor
Process
Manufacturing
Parameters
…
Material
Overhead Costs
Overhead (General, Sales & Administration, R&D …), Program Volumes,
Program Life, Target Costs, Logistics and Profit
Residual Mfg.
Overhead Costs

Focus on predictive & should costing
- BOM
- Material
- Geometry
- …
- Cost rates
- Material prices
- BOM, work plan
- …
- Product Portfolio Mgmt.
- Management Reports
- …
Product & process
engineering
Concept
development
PLM
Interfaces/
Data
Teamcenter
Product Cost
Management
Serial & Post costing
BI
External supplier parts
Ramp
up
Serial
production
After
market
ERP system:
Only costing of products after SOP based on
real production data and real supplier prices
ERP
Product
definition
In-house parts / assemblies
Pre & target costing
SOP EOP EOS
Design-to-cost
Purchase price analysis
Profitability calculation
Open book accounting

Comprehensive cross-functional solution
Profitability
Calculation
Controlling/
Finance
Adequate
Return on Investment
Key application fields
Pre & Target
Costing
Controlling/
Finance
Purchase Price
Analysis/Should-Cost
Purchasing/
Cost Engineering
Best-Cost-based
Purchase Prices
Open Book
Accounting
Sales /
Program-Mgmt.
Profitable
Sales Prices
Achievable
Cost Targets
Standardized Methodology - Consistent Data Management - Transparency - Efficient Processes/Interfaces
Design-to-
Cost/Should-Cost
Cost
Engineering
Cost-adequate
Product Designs

Meeting the high demands of purchasing should-cost analysis
Situation / Complication
• High demand for accurate and detailed cost calculations
particularly for high-volume parts (e.g. Automotive,
Machinery, Hightech, etc.)
• Purchased components often make up over 50 % of
production costs
• Knowledge of price structure, cost drivers and external
manufacturing processes is increasingly important
• Increasing amount of complex manufacturing processes
Solution
• Transparent and accurate should costing based on
integrated knowledge database, cost models and cycle
time calculators
• Simulation of price effects based on modified raw material
prices, changed manufacturing parameters or processes,
global factor costs, etc.
• Negotiation based on facts (processes and parameters)

Simulation capabilities
Where to manufacture?
• Make or Buy
• Mfg. plant (e.g. green vs. brown field)
• Best Cost Country Sourcing
What if commercial factors vary?
• Production volumes
• Prices of raw materials & purchased parts
• Cost and overhead rates (e.g. labor)
• Exchange rates
• Depreciation standards for investments
What if technical parameters change?
• Product/design variants
• Manufacturing technology
• Materials
• Process parameters (e.g. utilization, scrap rate)
Simulation of commercial and technical what-if scenarios
Up?
Down?
Cost
impact?

Bottom-up purchase price analysis
Analysis
Bottom-up
cost calculation
Benchmarks/
best-practice
processes
Analysis of cost
structure/drivers
Benchmark
calculation
1
Initial price
judgement
Validation
Validation process
/ cost data
Research and
expert
discussions
Adjustment of 1st
Price Calculation
Process
validation
2
Validated
target price
RFP to Alternative
Suppliers
Comparison of
Cost-break-down
Comparison of
Process
Parameters
Benchmarking
of alternatives
3
Market conform
cost parameters
Realization
Implementation of
Agreed Measures
Project follow-up /
Controlling
Contractual
Agreement
Realization of
potential
5
Final price
achieved
Negotiated cost
structure
Preparation
Supplier-side
Process
Evaluation
Cost Structure
Negotiation
Final
discussion
4
$
First offer
Should Cost with Teamcenter Product Costing

Integrated costing process for products and tools
Comprehensive
project overview
• Unified platform for product and tool costing
• Full system integration, no (manual) interface
• No redundant data in different systems
• Automatic roll-up or amortization of tool cost
across product BOM and project
• Total impact of changes is immediately visible up
to the project level

Should Costing within Teamcenter

Valuable data content for reliable should cost estimates
material is selected from the master data.
Knowledge Domain Processes
Pre-configured reference
processes for numerous
manufacturing technologies
Production Sites
Global labor rates & other factor costs for
all relevant countries & regions

Manufacturing steps
The cycle time for this
manufacturing step is calculated
depending on the machine and
the used material.

Reports
Comparing 2 calculation variants
and showing the impact of changing
cost factors such as production site,
manufacturing technologies etc.
The calculation presents the
results for this part.

Executive Summary
Meet high demand for accurate and detailed cost estimates for
industries with a high production volume
Leverage product cost optimization by combining controlling with cost
engineering capabilities in a single, easy to use tool
Realize reliable should cost estimates by using valuable reference
data with flexible cost models (e.g. for purchase price analysis)
Optimize product costs in order to maximize margins, profits and
return on investment (ROI)
1
2
3
4
Based on one unified platform, fully integrated product and tool
costing to ensure consistent data and a seamless process
5

Further information
For more information please visit
http://www.siemens.com/plm

Siemens 9 10-final_version_sould_costing_webcast_4_3

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Siemens 9 10-final_version_sould_costing_webcast_4_3