Yet aside from general engineering economics that focuses on capital allocation problems, system designers have virtually no resources and obtain little or no training in cost analysis,
Trang 2Series Editors: Avram Bar-Cohen (University of Maryland, USA)
Shi-Wei Ricky Lee (Hong Kong University of Science and
Technology, ROC)
Published
Vol 1: Cost Analysis of Electronic Systems
by Peter Sandborn
Vol 2: Design and Modeling for 3D ICs and Interposers
by Madhavan Swaminathan and Ki Jin Han
Vol 3: Cooling of Microelectronic and Nanoelectronic Equipment:
Advances and Emerging Research
edited by Madhusudan Iyengar, Karl J L Geisler and Bahgat Sammakia
Vol 4: Cost Analysis of Electronic Systems (Second Edition)
by Peter Sandborn
Trang 4World Scientific Publishing Co Pte Ltd.
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A catalogue record for this book is available from the British Library.
WSPC Series in Advanced Integration and Packaging — Vol 4
COST ANALYSIS OF ELECTRONIC SYSTEMS
Second Edition
Copyright © 2017 by World Scientific Publishing Co Pte Ltd
All rights reserved This book, or parts thereof, may not be reproduced in any form or by any means,
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ISBN 978-981-3148-25-3
Printed in Singapore
Trang 5v
Preface to the Second Edition
I received helpful criticism from numerous sources since the first edition
of this book was published in 2013 In addition to the first edition’s use as
a graduate course text, we are now using selected chapters in an undergraduate course on engineering economics and cost modeling Along with the inputs I have received on how to make the original topics more complete, I have also had numerous requests for new material addressing new areas
Of course no book like this can ever be truly complete, but attempting
to make it so keeps me out of trouble and gives me something to do on the weekends and evenings
I have added two new chapters and two new appendices to this edition The new chapter on real option analysis treats modeling of management flexibility and provides a case study on maintenance optimization A chapter on cost-benefit analysis has also been added This chapter comes
as the direct result of many inquiries about how to model consequences (benefits, risks, etc.) concurrent with costs The new appendices cover weighted average cost of capital and discrete-event simulation, both of these topics don’t warrant a chapter, but nonetheless are useful topics for this type of book
In addition to the new chapters and appendices, several new sections have been added to the 1st edition chapters and new problems have been added to all the chapters (and a few problems that students convinced me didn’t quite make sense have been deleted)
Peter Sandborn
2016
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Trang 7vii
Preface to the First Edition
Twenty years ago many engineers involved in the design of electronic systems took, at most, a secondary interest in the cost effectiveness of their design decisions; they considered that someone else’s job or an issue to be addressed after the initial release of the product.1 Today the world has changed Every engineer in the design process for an electronic product is also tasked with understanding, or contributing to the understanding of, the economic tradeoffs associated with their decisions Yet aside from general engineering economics that focuses on capital allocation problems, system designers have virtually no resources and obtain little or
no training in cost analysis, let alone analysis that is specific to electronic systems
Unfortunately, when engineering students were asked what they thought the cost of a product was (and assigned to determine cost estimates
of products in an undergraduate capstone design course at the University
of Maryland) they all too often added up the costs of procuring the bill of materials and declared that to be the cost of the product Few students are surprised when shown a breakdown of the life-cycle costs or the cost of ownership of systems, but virtually none, even those who had taken courses in engineering economics, were equipped to competently estimate the manufacturing or life-cycle cost of a real product
This book is an outgrowth of a course on Electronic Product and System Cost Analysis developed at the University of Maryland Since
1999, the course has been taught as a one-semester graduate course (populated with a mix of senior-level undergraduates and graduate students) and many times in the form of an industry short course
1 Many types of electronic systems have been primarily driven by time to market rather than cost; this situation is not necessarily shared by non-electronic systems
Trang 8This book is intended to be a resource for electronic system designers who want to be able to assess the economic impact of their design decisions on the manufacturing of a system and its life cycle
The book is oriented toward those interested in the entire electronic systems hierarchy from the bare die (integrated circuits) through the single chip packages, modules, boards, and enclosures
This book provides an in-depth understanding of the process of predicting the cost of systems Elements of traditional engineering economics are melded with manufacturing process modeling and life-cycle cost management concepts to form a practical foundation for predicting the real cost of electronic products
Various manufacturing cost analysis methods are included in the book: process-flow cost modeling and parametric, cost-of-ownership, and activity-based costing The effects of learning curves, data uncertainty, test and rework processes, and defects are considered in conjunction with these methodologies In addition to manufacturing processes, the product life-cycle costs associated with the sustainment of systems are also addressed through a treatment of the cost impacts of reliability (sparing, availability, warranty) and obsolescence The chapters use real-life scenarios from integrated circuit fabrication, electronic systems assembly, substrate fabrication, and electronic systems testing and support at various levels The chapters contain problems of varying levels of difficulty, ranging from alternative numerical values that can be used in the examples included in the chapter text to derivations of relations presented in the text and extensions of the models described Even for the simple problems, students may have to reproduce (via spreadsheet or other methods) the examples from the text before attempting the problems The notation (symbols) used in each chapter are summarized in the Appendix Every attempt has been made to make the notation consistent from chapter to chapter; however, some common symbols have different meanings in different chapters
The author is grateful to many people who have made this a much better book with their input First, I want to thank the several hundred students who have taken courses at the University of Maryland and seem
to somehow always find new and unique questions to ask every time it is taught My graduate students, present and past, deserve appreciation for
Trang 9their contributions to many portions of the book In particular I would like
to acknowledge Andre Kleyner (Delphi) and Linda Newnes (University of Bath) for their contributions reading and commenting on several of the chapters I would also like to thank my numerous colleagues at the University of Maryland and in CALCE, including Michael Pecht and Avi Bar-Cohen for encouraging the writing of this book
Peter Sandborn
2013
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Trang 11xi
Contents
Preface to the Second Edition v
Preface to the First Edition vii
Chapter 1 Introduction 1
1.1 Cost Modeling 1
1.2 The Product Life Cycle 4
1.3 Life-Cycle Cost Scope 7
1.4 Cost Modeling Definitions 8
1.5 Cost Modeling for Electronic Systems 11
1.6 The Organization of this Book 12
References 12
Part I Manufacturing Cost Modeling 15
I.1 Classification of Products Based on Manufacturing Cost 17
References 18
Chapter 2 Process-Flow Analysis 19
2.1 Process Steps and Process Flows 19
2.1.1 Process-Step Sequence 21
2.1.2 Process-Step Inputs and Outputs 21
2.2 Process-Step Calculations 22
2.2.1 Labor Costs 23
2.2.2 Materials Costs 24
2.2.3 Tooling Costs 24
2.2.4 Equipment/Capital Costs 25
2.2.5 Total Cost 25
2.2.6 Capacity 26
2.3 Process-Flow Examples 27
2.3.1 Simple Pick & Place and Reflow Process 28
2.3.2 Multi-Step Process-Flow Example 29
2.4 Technical Cost Modeling (TCM) 31
2.5 Comments 32
Trang 12References 32
Problems 33
Chapter 3 Yield 35
3.1 Defects 36
3.2 Yield Prediction 37
3.2.1 The Poisson Approximation to the Binomial Distribution 39
3.2.2 The Poisson Yield Model 42
3.2.3 The Murphy Yield Model 43
3.2.4 Other Yield Models 44
3.3 Accumulated Yield 46
3.3.1 Multi-Step Process-Flow Example 47
3.3.2 The Known Good Die (KGD) Problem 48
3.4 Yielded Cost 50
3.5 The Relationship Between Yield and Producibility 54
References 56
Bibliography 57
Problems 57
Chapter 4 Equipment/Facilities Cost of Ownership (COO) 61
4.1 The Cost of Ownership Algorithm 62
4.2 Cost of Ownership Modeling 64
4.2.1 Capital Costs 64
4.2.2 Sustainment Costs 64
4.2.3 Performance Costs 66
4.3 Using COO to Compare Two Machines 67
4.4 Estimating Product Costs 71
References 72
Bibliography 73
Problems 73
Chapter 5 Activity-Based Costing (ABC) 77
5.1 The Activity-Based Cost Modeling Concept 78
5.1.1 Applicability of ABC to Cost Modeling 79
5.2 Formulation of Activity-Based Cost Models 79
5.2.1 Traditional Cost Accounting (TCA) 80
5.2.2 Activity-Based Costing 80
5.3 Activity-Based Cost Model Example 82
5.4 Time-Driven Activity-Based Costing (TDABC) 84
Trang 135.5 Summary and Discussion 87
References 87
Bibliography 88
Problems 88
Chapter 6 Parametric Cost Modeling 93
6.1 Cost Estimating Relationships (CERs) 94
6.1.1 Developing CERs 96
6.2 A Simple Parametric Cost Modeling Example 97
6.3 Limitations of CERs 100
6.3.1 Bounds of the Data 100
6.3.2 Scope of the Data 101
6.3.3 Overfitting 101
6.3.4 Don’t Force a Correlation When One Does Not Exist 103
6.3.5 Historical Data 103
6.4 Other Parametric Cost Modeling/Estimation Approaches 104
6.4.1 Feature-Based Costing (FBC) 104
6.4.2 Neural Network Based Cost Estimation 105
6.4.3 Costing by Analogy 106
6.5 Summary and Discussion 106
References 107
Bibliography 108
Problems 109
Chapter 7 Test Economics 113
7.1 Defects and Faults 114
7.1.1 Relating Defects to Faults 115
7.2 Defect and Fault Coverage 120
7.3 Relating Fault Coverage to Yield 122
7.3.1 A Tempting (but Incorrect) Derivation of Outgoing Yield 122
7.3.2 A Correct Interpretation of Fault Coverage 123
7.3.3 A Derivation of Outgoing Yield (Y out) 124
7.3.4 An Alternative Outgoing Yield Formulation 129
7.4 A Test Step Process Model 129
7.4.1 Test Escapes 132
7.4.2 Defects Introduced by Test Steps 132
7.5 False Positives 133
7.5.1 A Test Step with False Positives 135
7.5.2 Yield of the Bonepile 137
Trang 147.6 Multiple Test Steps 137
7.6.1 Cascading Test Steps 138
7.6.2 Parallel Test Steps 138
7.7 Financial Models of Testing 139
7.8 Other Test Economics Topics 140
7.8.1 Wafer Probe (Wafer Sort) 140
7.8.2 Test Throughput 142
7.8.3 Design for Test (DFT) 143
7.8.4 Automated Test Equipment Costs 149
References 150
Bibliography 151
Problems 151
Chapter 8 Diagnosis and Rework 155
8.1 Diagnosis 156
8.2 Rework 158
8.3 Test/Diagnosis/Rework Modeling 159
8.3.1 Single-Pass Rework Example 160
8.3.2 A General Multi-Pass Rework Model 163
8.3.3 Variable Rework Cost and Yield Models 169
8.3.4 Example Test/Diagnosis/Rework Analysis 171
8.4 Rework Cost (C rework fixed) 177
References 179
Problems 180
Chapter 9 Uncertainty Modeling — Monte Carlo Analysis 183
Uncertainty Modeling 185
9.1 Representing the Uncertainty in Parameters 186
9.2 Monte Carlo Analysis 187
9.2.1 How Does Monte Carlo Work? 188
9.2.2 Random Sampling Values from Known Distributions 190
9.2.3 Triangular Distribution Derivation 192
9.2.4 Random Sampling from a Data Set 193
9.2.5 Implementation Challenges with Monte Carlo Analysis 194
9.3 Sample Size 196
9.4 Example Monte Carlo Analysis 198
9.5 Stratified Sampling (Latin Hypercube) 200
9.5.1 Building a Latin Hypercube Sample (LHS) 201
9.5.2 Comments on LHS 203
Trang 159.6 Discussion 204
References 205
Bibliography 206
Problems 206
Chapter 10 Learning Curves 209
10.1 Mathematical Models for Learning Curves 210
10.2 Unit Learning Curve Model 213
10.3 Cumulative Average Learning Curve Model 213
10.4 Marginal Learning Curve Model 214
10.5 Learning Curve Mathematics 215
10.5.1 Unit Learning Data from Cumulative Average Learning Curves 215
10.5.2 The Slide Property of Learning Curves 217
10.5.3 The Relationship between the Learning Index and the Learning Rate 217
10.5.4 The Midpoint Formula 218
10.5.5 Comparing Learning Curves 220
10.6 Determining Learning Curves from Actual Data 222
10.6.1 Simple Data 223
10.6.2 Block Data 224
10.7 Learning Curves for Yield 227
10.7.1 Gruber’s Learning Curve for Yield 228
10.7.2 Hilberg’s Learning Curve for Yield 229
10.7.3 Defect Density Learning 231
References 232
Bibliography 233
Problems 234
Part II Life-Cycle Cost Modeling 239
II.1 System Sustainment 241
II.2 Cost Avoidance 244
II.3 Should-Cost 245
II.4 Time Value of Money 246
II.4.1 Inflation 248
II.5 Logistics 249
II.6 References 249
Trang 16Chapter 11 Reliability 251
11.1 Product Failure 252
11.2 Reliability Basics 255
11.2.1 Failure Distributions 256
11.2.2 Exponential Distribution 259
11.2.3 Weibull Distribution 260
11.2.4 Conditional Reliability 261
11.3 Qualification and Certification 262
11.4 Cost of Reliability 264
References 265
Bibliography 265
Problems 266
Chapter 12 Sparing 269
Challenges with Spares 270
12.1 Calculating the Number of Spares 271
12.1.1 Multi-Unit Spares for Repairable Items 274
12.1.2 Sparing for a Kit of Repairable Items 275
12.1.3 Sparing for Large k 277
12.2 The Cost of Spares 278
12.2.1 Spares Cost Example 280
12.2.2 Extensions of the Cost Model 281
12.3 Summary and Comments 282
References 283
Bibliography 283
Problems 284
Chapter 13 Warranty Cost Analysis 287
How Warranties Impact Cost 288
13.1 Types of Warranties 291
13.2 Renewal Functions 292
13.2.1 The Renewal Function for Constant Failure Rate 295
13.2.2 Asymptotic Approximation of M(t) 296
13.3 Simple Warranty Cost Models 297
13.3.1 Ordinary (Non-Renewing) Free-Replacement Warranty Cost Model 297
13.3.2 Pro-Rata (Non-Renewing) Warranty Cost Model 299
13.3.3 Investment of the Warranty Reserve Fund 301
13.3.4 Other Warranty Reserve Fund Estimation Models 303
Trang 1713.4 Two-Dimensional Warranties 303
13.5 Warranty Service Costs — Real Systems 307
References 309
Problems 310
Chapter 14 Burn-In Cost Modeling 313
The Cost Tradeoffs Associated with Burn-In 314
14.1 Burn-In Cost Model 315
14.1.1 Cost of Performing the Burn-In 315
14.1.2 The Value of Burn-In 317
14.2 Example Burn-In Cost Analysis 318
14.3 Effective Manufacturing Cost of Units That Survive Burn-In 321
14.4 Burn-In for Repairable Units 322
14.5 Discussion 322
References 322
Bibliography 323
Problems 323
Chapter 15 Availability 325
15.1 Time-Based Availability Measures 325
15.1.1 Time-Interval-Based Availability Measures 326
15.1.2 Downtime-Based Availability Measures 328
15.1.3 Application-Specific Availability Measures 331
15.2 Maintainability and Maintenance Time 332
15.3 Monte Carlo Time-Based Availability Calculation Example 334
15.4 Markov Availability Models 336
15.5 Spares Demand-Driven Availability 338
15.5.1 Backorders and Supply Availability 339
15.5.2 Erlang-B 341
15.5.3 Materiel Availability 342
15.5.4 Energy-Based Availability 343
15.6 Availability Contracting 344
15.6.1 Product Service Systems (PSS) 346
15.6.2 Power Purchase Agreements (PPAs) 346
15.6.3 Performance-Based Logistics (PBLs) 347
15.6.4 Public-Private Partnerships (PPPs) 347
15.7 Readiness 348
15.8 Discussion 349
Trang 18References 351
Problems 352
Chapter 16 The Cost Ramifications of Obsolescence 355
Electronic Part Obsolescence 357
16.1 Managing Electronic Part Obsolescence 358
16.2 Lifetime Buy Costs 359
16.2.1 The Newsvendor Problem 361
16.2.2 Application of the Newsvendor Optimization Problem to Electronic Parts 366
16.3 Strategic Management of Obsolescence 368
16.3.1 Porter Design Refresh Model 369
16.3.2 MOCA Design Refresh Model 373
16.3.3 Material Risk Index (MRI) 374
16.4 Discussion 376
16.4.1 Budgeting/Bidding Support 376
16.4.2 Value of DMSMS Management 376
16.4.3 Software Obsolescence 377
16.4.4 Human Skills Obsolescence 377
References 378
Problems 379
Chapter 17 Return on Investment (ROI) 381
17.1 Definition of ROI 381
17.2 Cost Reduction and Cost Savings ROIs 383
17.2.1 ROI of a Manufacturing Equipment Replacement 383
17.2.2 Technology Adoption ROI 385
17.3 Cost Avoidance ROI 391
17.4 Stochastic ROI Calculations 396
17.5 Summary 398
References 399
Problems 399
Chapter 18 The Cost of Service 403
18.1 Why Estimate the Cost of a Service? 404
18.2 An Engineering Service Example 405
18.3 How to Estimate the Cost of an Engineering Service 406
18.4 Application of the Service Costing Approach within an Industrial Company 407
Trang 1918.5 Bidding for the Service Contract 415
References 416
Problems 416
Chapter 19 Software Development and Support Costs 417
19.1 Software Development Costs 418
19.1.1 The COCOMO Model 419
19.1.2 Function-Point Analysis 422
19.1.3 Object-Point Analysis 426
19.2 Software Support Costs 427
19.3 Discussion 429
References 429
Bibliography 430
Problems 430
Chapter 20 Total Cost of Ownership Examples 433
20.1 The Total Cost of Ownership of Color Printers 433
20.2 Total Cost of Ownership for Electronic Parts 437
20.2.1 Part Total Cost of Ownership Model 438
20.2.2 Example Analyses 443
20.3 Levelized Cost of Energy (LCOE) 446
References 447
Chapter 21 Cost, Benefit and Risk Tradeoffs 449
21.1 Cost-Benefit Analysis (CBA) 449
21.1.1 What is a Benefit? 450
21.1.2 Performing CBA 451
21.1.3 Determining the Value of Human Life 456
21.1.4 Comments on CBA 459
21.2 Modeling the Cost of Risk 460
21.2.1 A Multiple Severity Model for Technology Insertion 461
21.3 Rare Events 465
21.3.1 What is a Rare Event? 466
21.3.2 Unbalanced Misclassification Costs 466
21.3.3 The False Positive Paradox 471
References 473
Bibliography 474
Problems 474
Trang 20Chapter 22 Real Options Analysis 477
22.1 Discounted Cash Flow (DCF) and Decision Tree Analyses (DTA) 477
22.2 Introduction to Real Options 480
22.3 Valuation 482
22.3.1 Replicating Portfolio Theory 483
22.3.2 Binomial Lattices 485
22.3.3 Risk-Neutral Probabilities and Riskless Rates 490
22.4 Black-Scholes 491
22.4.1 Correlating Black-Scholes to Binomial Lattice 494
22.5 Simulation-Based Real Options Example: Maintenance Options 495
22.6 Closing Comments 499
References 500
Bibliography 500
Problems 501
Appendix A Notation 503
Appendix B Weighted Average Cost of Capital (WACC) 523
B.1 The Weighted Average Cost of Capital (WACC) 524
B.1.1 Cost of Equity 524
B.1.2 Cost of Debt 526
B.1.3 Calculating the WACC 526
B.2 Forecasting Future WACC 528
B.3 Comments 530
B.3.1 Trade-off Theory 530
B.3.2 Social Opportunity Cost of Capital (SOC) 531
References 531
Problems 531
Appendix C Discrete-Event Simulation (DES) 533
C.1 Events 535
C.2 DES Examples 535
C.2.1 A Trivial DES Example 536
C.2.2 A Not So Trivial DES Example 537
C.3 Discussion 539
References 540
Bibliography 541
Problems 541
Index 543
Trang 21to lower overall costs, the earlier an organization can understand the cost
of manufacturing and support, the better All too often, managers lack critical cost information with which to make informed decisions about whether to proceed with a product, how to support a product, or even how much to charge for a product
Cost often represents the “golden metric” or benchmark for analyzing and comparing products and systems Cost, if computed comprehensively enough, can combine multiple manufacturability, quality, availability, and timing attributes together into a single measure that everyone comprehends
1.1 Cost Modeling
Cost modeling is one of the most common business activities performed
in an organization But what is cost modeling, or maybe more importantly, what isn’t it? The goal of cost modeling is to enable the estimation of product or system life-cycle costs Cost analyses generally take one of two forms:
Ex post facto (after the event) – Cost is often computed after
expenditures have been made Accounting represents the use of cost as an objective measure for recording and assessing the
Trang 22financial performance of an organization and deals with what either has been done or what is currently being done within an organization, not what will be done in the future The accountant’s cost is a financial snapshot of the organization at one particular moment in time
A priori (prior to) – These cost estimations are made before
manufacturing, operation and support activities take place
Cost modeling is an a priori analysis It is the imposition of structure,
incorporation of knowledge, and inclusion of technology in order to map the description of a product (geometry, materials, design rules, and architecture), conditions for its manufacture (processes, resources, etc.), and conditions for its use (usage environment, lifetime expectation, training and support requirements) into a forecast of the required monetary expenditures Note, this definition does not specify from whom the monetary resources will be required — that is, they may be required from the manufacturer, the customer, or a combination of both
Engineering economics treats the analysis of the economic effects of engineering decisions and is often identified with capital allocation problems Engineering economics provides a rigorous methodology for comparing investment or disinvestment alternatives that include the time value of money, equivalence, present and future value, rate of return, depreciation, break-even analysis, cash flow, inflation, taxes, and so forth While it would be wrong to say that this book is not an engineering economics book (it is), its focus is on the detailed cost modeling necessary
to support engineering economic analyses with the inputs required for making investment decisions However, while traditional engineering economics is focused on the financial aspects of cost, cost modeling deals with modeling the processes and activities associated with the manufacturing and support of products and systems, i.e., determining the actual costs that engineering economics uses within its cash flow oriented decision making processes
Unfortunately, it is news to many engineers that the cost of products is not simply the sum of the costs of the bill of materials An undergraduate mechanical engineering student at the University of Maryland, in his final report from a design class, stated: “The sum total cost to produce each accessory is 0.34+0.29+0.56+0.65+0.10+0.17 = $2.11 [the bill of
Trang 23materials cost] Since some estimations had to be made, $2.00 will arbitrarily be added to the cost of [the] product to help cover costs not accounted for This number is arbitrary only in the sense that it was chosen
at random.” Unfortunately, analyses like this are only too prevalent in the engineering community and traditional engineering economics texts don’t necessarily provide the tools to remedy this problem
Cost modeling is needed because the decisions made early in the design process for a product or system often effectively commit a significant portion of the future cost of a product Figure 1.1 shows a representation
of the product manufacturing cost commitment associated with various product development processes Even though it is not represented in Figure 1.1, the majority of the product’s life-cycle cost is also committed via decisions made early in the design process
Fig 1.1 80% of the manufacturing cost and performance of a product is committed in the first 20% of the design cycle, [Ref 1.1]
Cost modeling, like any other modeling activity, is fraught with weaknesses A well-known quote from George Box, “Essentially, all models are wrong, but some are useful,” [Ref 1.2] is appropriate for describing cost modeling First, cost modeling is a “garbage in, garbage out” activity — if the input data is inaccurate, the values predicted by the model will be inaccurate That said, cost modeling is generally combined with various uncertainty analysis techniques that allow inputs to be
Trang 24expressed as ranges and distributions rather than point values (see Chapter 9) Obtaining absolute accuracy from cost models depends on having some sort of real-world data to use for calibration To this end, the essence of cost modeling is summed up by the following observation from Norm Augustine [Ref 1.3]:
“Much cost estimation seems to use an approach descended from the technique widely used to weigh hogs in Texas It is alleged that in this process, after catching the hog and tying it to one end
of a teeter-totter arrangement, everyone searches for a stone which, when placed on the other end of the apparatus, exactly balances the weight of the hog When such a stone is eventually found, everyone gathers around and tries to guess the weight of the stone Such is the science of cost estimating.”
Nonetheless, when absolute accuracy is impossible, relatively accurate costs models can often be very useful.1
1.2 The Product Life Cycle
Figure 1.2 provides a high-level summary of a product’s life cycle Note that not all the steps that appear in Figure 1.2 will be relevant for every type of electronic product and that more detail can certainly be added Product life cycles for electronic systems vary widely and the treatment in this section is intended to be only an example
1 Relatively accurate cost models produce cost predictions that have limited (or unknown) absolute accuracy, but the differences between model predictions can
be extremely accurate if the cost of the effects omitted from the model are a
“wash” between the cases considered — that is, when errors are systematic and identical in magnitude between the cases considered While an absolute prediction
of cost is necessary to support the quoting or bidding process, an accurate relative cost can be successfully used to support making a business case for selecting one alternative over another
Trang 25Fig 1.2 Example product/system life cycle
In the process shown, a specific customer provides the requirements or
a marketing organization determines the requirements through interactions
in the marketplace with customers and competitors Conceptual design encompasses selection of system architecture, possibly technologies, and potentially key parts
Specifications are engineering’s response to requirements and results
in a bid that goes to the customer or to the marketing organization The bid
is a cost estimation against the specifications Design represents all the activities necessary to perform the detailed design and prototyping of the product Verification and qualification activities determine if the design fulfills the specifications and requirements Qualification occurs at the functional and environmental (reliability) levels, and may also include
Requirements Capture
Conceptual Design (Trade-Off analysis)
Design
Verification and Qualification
Bid Specification
Trang 26certification activities that are necessary to sell or deliver the product to the customer Production is the manufacturing process and includes sourcing the parts, assembly, and recurring functional testing Operation and support (O&S) represents the use and sustainment of the product or system O&S represents recurring use — for example, power, water, or fuel — as well as maintenance, servicing the warranty, training and support for users, and liability Sales and marketing occur concurrent with production and operation and support Finally, end of life represents activities needed to terminate the use of the product or system, including possible disassembly and/or disposal
A common thread through the activities in the life cycle of a product or system is that they all cost money The product requirements are of particular interest since they ultimately determine the majority of the cost
of a product or system and also represent the primary and initial inputs for cost modeling The requirements will, of course, be refined throughout the design process, but they are the inputs for the initial cost estimation Figure 1.3 shows the elements that go into the product requirements
Fig 1.3 Product/system requirements, [Ref 1.4]
Product Definition
+
Design, Technology and Manufacturing Realities
Scheduling Design Tools Testing
Cost
Manufacturing Skill Set
=
Market Requirements
Risk Tolerance
Resource Allocations
Customer
Inputs
Technology Base Selling Price
Corporate Objectives and Culture
+
Trang 271.3 Life-Cycle Cost Scope
The factors that influence cost analysis are shown in Figure 1.4 For cost, high-volume products, the manufacturer of the product seeks to maximize the profit by minimizing its cost For a high-volume consumer electronics product (e.g., a cell phone), the cost may be dominated by the bill of materials cost However, for some products, a more important customer requirement for the product may be minimizing the total cost of ownership of the product The total cost of ownership includes not only the cost of purchasing the product, but the cost of maintaining and using
low-it, which for some products can be significant Consider an inkjet printer that sells for as little as $20 A replacement ink cartridge may cost $40 or more Although the cost of the printer is a factor in deciding what printer
to purchase, the cost and number of pages printed by each ink cartridge contributes much more to the total cost of ownership of the printer For products such as aircraft, the operation and support costs can represent as much as 80% of the total cost of ownership
Since manufacturing cost and the cost of ownership are both important, Part I of this book focuses on manufacturing cost modeling and Part II expands the treatment to include life-cycle costs and takes a broader view
of the cost of ownership
Fig 1.4 The scope of cost analysis (after [Ref 1.5])
Price
Design and R&D Manufacturing Post-Manufacturing Support
Training Warranty Legal/liability Disposal Financing (cost of money) Qualification/certification Refresh/Redesign
Cost of Failure Qualification/certification Maintenance (spare parts) Training
Retirement and Disposal
• Capital
• Tooling
Manufacturer Retailer/distributor
Sustainment Costs
Trang 281.4 Cost Modeling Definitions
It is important to understand several basic cost modeling concepts in order
to follow the technical development in this book Many of these ideas will
be expanded upon in the chapters that follow
Price is the amount of money that a customer pays to purchase or procure
a product or service
Cost is the amount of money that the manufacturer/supporter of a product
or system or the supplier of a service requires to produce and/or provide the product or service Cost includes money, time and labor
Profit is the difference between price and cost,
ProfitCost
Technically, profit is the excess revenue beyond cost Profit is an accounting approximation of the earnings of a company after taxes, cash, and expenses Note that profit may be collected by different entities throughout the supply chain of the product or system
Recurring costs, also referred to as “variable” costs, are costs that are
incurred for each unit or instance of the product or system produced The concept of recurring cost is generally applicable to manufacturing processes For example, the cost of purchasing a part that is assembled into each individual product is a recurring cost
Non-recurring costs, also referred to as “fixed” costs, are charged once,
independent of the quantity of products manufactured and/or supported For example, design costs are non-recurring costs
Labor costs are the costs of employing the people required to perform
specific activities
Tooling cost is a non-recurring cost that is dependent on the quantity of
products manufactured and/or supported Examples of tooling costs are
Trang 29programming and calibration costs for manufacturing equipment, training people, and the purchase or manufacture of product-specific tools, jigs, stencils, fixtures, masks, and so on
Material costs are the cost of the materials associated with an activity
Material costs may include the purchase of more material than is used in the final product due to the waste generated during the manufacturing process, and it may include the purchase of consumable materials that are completely wasted during manufacturing, such as water
Capital costs, also called equipment or facilities costs, are the costs of
purchasing and maintaining the equipment and facilities necessary to perform manufacturing and/or support of a product or system In some cases, the capital costs associated with standard activities or processes are incorporated in the overhead rate Even if the capital costs are included in the overhead, specific capital costs may be included that are associated with buying unique equipment or facilities that must be created or purchased for a specific product
Depreciation is the decrease in the value of an asset (in the context of this
book, the asset is capital equipment or facilities) over time Depreciation
is used to spread the cost of an asset over time
Direct costs can be traced directly to (or identified with) a specific cost
center or object, such as a department, process, or product Direct costs (such as labor and material) vary with the rate of output but are uniform for each unit item manufactured
Overhead costs, also called indirect costs, are the portion of the costs that
cannot be clearly associated with particular operations, products, or projects and must be prorated among all the product units [Ref 1.6] Overhead costs include labor costs for persons who are not directly involved with a specific manufacturing process, such as managers and secretaries; various facilities costs such as utilities and mortgage payments
on the buildings; non-cash benefits provided to employees such as health insurance, retirement contributions, and unemployment insurance; and
Trang 30other costs of running the business such as accounting, taxes, furnishings, insurance, sick leave, and paid vacations
In traditional cost accounting, overhead costs are allocated to a designated base The base is often determined by direct labor hours or the sum of all the direct costs, but it can also be determined by machine time, floor space, employee count, material consumption, or some combination
of these When overhead is allocated based on direct labor hours, it is often
called a burden rate and is used to determine either the overhead cost,
C OH , or a burdened labor rate, L RB, as follows:
L pm
b = the labor burden rate (typical range: 0.3 b 2)
C L = the labor cost of manufacturing or assembly (per unit)
L R = the labor rate (often expressed in dollars per hour), which,
when converted to an annual basis, is an employee’s gross annual wage
Hidden costs are those costs that are difficult to quantify and may even be
impossible to connect with any particular product Examples of hidden costs include:
the gain or loss of market share
the stock price changes of a company
the company’s position in the market for future products
impacts on competitors and their response
cost associated with product failure and lawsuits brought against the company
long-term health, safety, and environmental impacts that may have
to be resolved in the future
Trang 31The impacts listed above are difficult to quantify in terms of cost because they require a view of the enterprise (i.e., the entire organization
or company) that includes more than just one product and an analysis horizon that is longer than the manufacturing and support life of any one product However, these costs are real and may contribute significantly to product cost
1.5 Cost Modeling for Electronic Systems
Fundamentally, all of the topics treated in this book are applicable to electronic products and systems, however, taken in total, the modeling techniques discussed are those required to assess the manufacturing and life-cycle sustainment of electronic products The following paragraphs describe attributes of electronic systems that differentiate their costs from non-electronic systems
non-For electronics products such as integrated circuits, relatively few organizations have manufacturing capability because of the extreme cost
of the required facilities The cost of recurring functional testing for electronics alone can represent a very large portion of the cost of products (even high-volume products), making the modeling and analysis of recurring functional testing an important contributor to cost modeling (see Chapters 7 and 8)
For all but the highest volume products, manufacturers and supporters
of electronic products have virtually no control over the supply chains for their parts As a result, products that are manufactured and/or supported for longer than a few years experience a high frequency of technology obsolescence, which can be very expensive to resolve (see Chapter 16) The majority of electronic products are not repaired if they fail during field use; they are thrown away (exceptions are low-volume, long-life, expensive systems) Moreover, most electronic systems are not pro-actively maintained and are traditionally subject to unscheduled (“break-fix”) maintenance policies
Trang 321.6 The Organization of this Book
This book is divided into two parts The first part (Chapters 2-8) focuses
on cost modeling for manufacturing electronic systems Several different approaches are discussed, in addition to manufacturing yield, recurring functional testing (test economics) and rework Demonstrations of the cost models in the first part of the book focus on the fabrication and assembly
of electronic products, ranging from fabricating integrated circuits and printed circuit boards to assembling parts on interconnects The second part of the book (Chapters 11-19) focuses on life-cycle cost analysis Life-cycle costing addresses non-manufacturing product and system costs, including maintenance, warranty, reliability, and obsolescence Chapters 20-22 include the broader topics of total cost of ownership of electronic products, cost-benefit analysis, and real options analysis Additional chapters (Chapters 9 and 10) address modifications to cost modeling to account for uncertainties and learning curves These topics are applicable
to both manufacturing and life-cycle cost analyses Appendices that treat discount rate determination and discrete-event simulation are also provided
A rich set of references (and in some cases bibliographies) have been provided within the chapters to support the methods discussed and to provide sources of information beyond the scope of this book In addition, problems are provided with the chapters to supplement the examples and demonstrations within the text
References
1.1 Sandborn, P A and Vertal, M (1998) Packaging tradeoff analysis: Predicting cost
and performance during system design, IEEE Design & Test of Computers, 15(3),
pp 10-19
1.2 Box, G E P and Draper, N R (1987) Empirical Model-Building and Response
Surfaces (Wiley, Hoboken, NJ)
1.3 Augustine, N R (1997) Augustine’s Laws, 6th Edition (AIAA, Reston, VA) 1.4 Sandborn, P and Wilkinson, C (2004) Chapter 3 - Product requirements,
constraints, and specifications, Parts Selection and Management, Ed M G Pecht,
(John Wiley & Sons, Inc., Hoboken, NJ)
Trang 331.5 Magrab, E B., Gupta, S K., McCluskey, F P and Sandborn, P A (2010)
Integrated Product and Process Design and Development - The Product Realization Process, 2nd Edition (CRC Press, Boca Raton, FL)
1.6 Ostwald, P F and McLaren, T S (2004) Cost Analysis and Estimating for
Engineering and Management (Pearson Prentice Hall, Upper Saddle River, NJ)
Trang 34Process-flow modeling is generally thought of as a bottom-up approach
to cost modeling In a bottom-up model the overall response or characteristic of a product is determined by accumulating the properties (responses and characteristics) of each individual action that takes place in the course of manufacturing the product The opposite of a bottom-up
approach is the top-down method, in which high-level attributes are used
to determine the responses or characteristics of the object without taking into account its constitute parts or the processes used to create it
2.1 Process Steps and Process Flows
In process-flow models, an object accrues cost (and other properties) as it moves through the sequence of process steps, as in Figure 2.1
Each process step starts with the state of the product after the preceding step (“Inputs”) The step then modifies the product and the output is a new state (“Outputs”), which forms the input to the process step that follows, and so on Usually, process-flow models are constructed so that the form
of the process step input matches the form of the output; this allows them
to be readily sequenced together Some types of process steps also provide
1 Workflow modeling is also sometimes referred to as process-flow modeling However, workflow modeling is a term usually ascribed to business processes rather than manufacturing processes
Trang 35a mechanism by which products can exit the process flow (“Fallout”) Objects that exit the process flow do not continue directly on to the next step in the sequence, although they may reenter the process flow at another point, either before or after the process step that removed them
Fig 2.1 Single process step
When two or more process steps are sequenced together, a process flow
is created A linear sequence of process steps is called a “branch.” The process flow for a complex manufacturing process could consist of one or more branches Multiple branches imply that independent sub-processes are taking place that eventually merge together to form the complete product A simple three-branch process flow is shown in Figure 2.2
Fig 2.2 A simple three-branch process flow for fabricating a multilayer electronic package Each rectangle in the process flow on the left could represent a process step
OutputsInputs
Process Step
Laye r 1 2 3 4 5 6 7 8 9 10 11 13 14 15
Example layer stack-up for an electronic package Clean
Trang 362.1.1 Process-Step Sequence
As mentioned above, a key attribute that differentiates process-flow modeling from other manufacturing cost analysis approaches is that it captures the order (or sequence) of the manufacturing activities Sequence matters when product instances (units) can be removed at some intermediate point in a process — for example, by a test step This is important because when an individual product is removed from the process (scrapped), the amount of money spent up to the point of removal must be known in order to properly allocate the scrapped value back into the product instances that remain in the process If all the inspection/testing of a product occurred only after the completion of all manufacturing steps, then the sequence of those steps, while important to actually make the product, may not be important for modeling the manufacturing cost However, if products are inspected and either repaired
or scrapped at some interim point in the process, then the sequence is very important Other methods capture the manufacturing activities, but do not readily capture the order in which the activities take place and are therefore less well suited for manufacturing processes that have significant in-process inspections, testing and rework — for example, electronics assembly processes
2.1.2 Process-Step Inputs and Outputs
Numerous different product properties can be identified, modified and accumulated during the process steps Obviously, for the purposes of cost modeling, we want to accumulate product cost through process steps; however, there are many other properties that may be useful to identify (and accumulate) and that may be required in order to accurately model the total cost of the product Properties that may be used include:
Cost – how much money has been spent (total and specific to particular cost categories – see Section 2.2)
Time – how long it takes to perform the process step for a product Actual elapsed time is useful for determining the throughput and
Trang 37cycle time associated with the process Touch time is associated with the labor content
Defects – the number of defects (total and of specific types) introduced by the process step
Mass – how much mass is added or subtracted from the product by the process step
Material content – inventory of all materials in the product
Material wasted – inventory of all materials in the waste stream for the product
Scrap – number of product instances scrapped
Energy – inventory of energy used (total and source specific) These properties do not represent a comprehensive list; other properties may be useful to support other types of models and analyses
2.2 Process-Step Calculations
Generally process steps can be divided into the following five types:
Fabrication or assembly steps – These are the most general process steps
Test/inspection steps – These are unique because they can remove product instances from the process flow (See Chapter 7 for a detailed discussion of test/inspection process steps.)
Rework steps – These operate on product instances that have been removed from the process flow by a test or inspection step and can either permanently remove those units from the process flow (scrap them), or rework them and insert them back into the process flow (See Chapter 8 for a detailed discussion of rework process steps.)
Waste disposition steps – These operate on the waste inventoried during a process flow
Insertion steps – These allow objects to be inserted into process flows
Trang 38The commonality in the step types described above is that they each can contribute labor, materials, tooling, and equipment/capital costs The following subsections describe the general calculation of these costs
2.2.1 Labor Costs
Labor costs refer to the cost of the people required to perform specific activities The labor cost of a process step associated with one product instance is determined from
p
R L L N
TL U
where
U L = the number of people associated with the activity (operator utilization); a value < 1 indicates that a person’s time is divided between multiple process steps; a value > 1 indicates that more than one person is involved
T = the length of time taken by the step (calendar time)
N p = the number of product instances that can be treated
simultaneously by the activity (note: this is a capacity, not a rate.)
L R = the labor rate If this is a burdened labor rate then the
overhead is included in C L; if it is not a burdened labor rate then overhead must be computed and added to the cost of the product separately
The product U L T is sometimes referred to as the touch time For example,
if a process step takes five minutes to perform, and one person is sharing his or her time equally between this step and another step that takes five
minutes to perform, then U L = 0.5 and T = 5 minutes for a touch time of
U L T = 2.5 minutes The throughput of the process step is given by the ratio
N p /T and the cycle time of the process step is the reciprocal of the
throughput
Trang 39wasted during manufacturing, such as water (see [Ref 2.1])
where
C t = the cost of the tooling object or activity
N t = the number of tooling objects or activities necessary to make
the total quantity, Q, of products
Q = the quantity of products that will be made
Examples of tooling costs are programming and calibration costs for manufacturing equipment, training people, and purchasing or manufacturing product-specific tools, jigs, stencils, fixtures, masks, and so
on
Trang 402.2.4 Equipment/Capital Costs
Capital costs are the costs of purchasing and maintaining the manufacturing equipment and facilities In general, capital costs are determined from
e C
T N
T D
C
where T and N p are as defined in Equation (2.1), and
C e = the purchase price of the capital equipment or facility
T op = the operational time per year of the equipment or facilities =
(equipment operational time as a fraction) (hours/year)
D L = the depreciation life in years This equation assumes a “straight
line” method is used to model depreciation; that is, depreciation is linearly proportional to the length of time of service
The term in the brackets in Equation (2.4) is the fraction of the equipment’s annual life consumed by producing one unit of the product
In some cases, the capital costs associated with a standard manufacturing process are incorporated into the overhead rate Even if the capital costs are included in the overhead, Equation (2.4) may still be used to include the cost of unique equipment or facilities that must be created or purchased for a specific product
where
C OH = the overhead (indirect) cost allocated to each product
instance (alternatively it may be included in C L)
C W = the waste disposition cost per product instance (management
of hazardous and non-hazardous waste generated during the manufacturing process) This cost may be included in the