Accounting Definitions For Setup
Thanks to Galorath’s Joe Falque for providing these definitions for setup:
Setup Accounting Definition
Expenses incurred each time a batch is produced. It consists of engineering cost of setting up the production runs or machines, paperwork cost of processing the work order, and ordering cost to provide raw materials for the batch.
Production Setup
Production setup activities support an operation’s need to manufacture a diversity of products on the same equipment. Since setups are non value added, firms should seek to minimize their impact on manufacturing capacity and flexibility. World class manufacturing calls for heavy focus on setup reduction activities to support inventory reduction, capacity debottlenecking, and manufacturing flexibility. One-time portion of a production cycle in which a specific machine, work center, or assembly line is ‘made ready’ to switch from production of the last good piece of the last lot to the first good piece of the new lot, also known as change over.
Manufacturing Definition
Setup Cost
Setup costs include the labor and material to ready a machine for production. They may include the processing of work orders or a first-article inspection. Gathering of all required equipment hand and automated, tools, work orders, materials etc. which are needed to perform the manufacturing process.
Setup Cost Calculation
Setup costs are treated as a one time occurrence and that cost is divided or amortized over the batch size to be produced during the batch cycle. Each unit of the batch carries an equal share of the set up time and materials cost which are added to each unit run time and materials to calculate a total per unit cost. This cost curve on the part cost figure is high when batches are small and rapidly decreases with increasing batch quantity.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Coffee Maker Cost Estimation Using SEER for Manufacturing
The department of Industrial Management & Systems Engineering at West Virginia University used SEER for Manufacturing (formerly SEER-DFM) to determine the costs of an off the shelf coffee maker and identified potential cost savings by redesigning for manufacturability. This is one of the strengths of SEER-MFG: the ability to understand costs of a design and determine ways to reduce cost. One group was able to reduce costs from $21.25 to $11.53. They found that:
“SEER is an estimation and analysis application that lets you identify, evaluate and manage the complex array of cost, labor, assembly, process, part design, material and production variables that effect manufacturing operations from its most comprehensive knowledge base” and that “it is used to facilitate proactive real time cost impact assessments of commodity design alternatives in today’s global sourcing environment.”
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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New Release of SEER for Manufacturing Includes Refined Machining Model
What an interesting journey SEER for Manufacturing (SEER-MFG, formerly known as SEER-DFM) has had in development. Continued adding of additional manufacturing process has led the way. And the latest release includes a completely redone machining model as well.
As major organizations continue to apply SEER-MFG to reducing costs there has been an increasing number of users who wanted the detail in the estimate to be sufficient for machine scheduling. The Galorath staff, led by Dr. Chris Rush, Keith Garland and Joe Falque, along with the excellent software developers, accomplished this and much more including updates to composites modeling and other often requested processes. Congratulations team.
And congratulations to the customers who are using SEER-MFG to continually drive down costs, both in manufacture and in parts costing and decision process.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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State Department Lifts ITAR Restrictions on SEER for Manufacturing Aerostructures Plug-in
We are pleased to have received the official notification that Galorath’s Plug-in for Aerostructures, formerly known as the Composites Affordability Initiative Plug-in, has been freed from restrictions for international sales. This means Galorath can offer SEER for Manufacturing – Aerostructures Edition to customers in any country with which the United States allows trade, as well as use by non-US citizens.
Galorath is proud to have worked with several leading American aerospace manufacturers (Boeing, Lockheed Martin, Northrop Grumman and GE Aircraft Engines) in a major cooperative effort to develop the Aerostructures plug-in. The plug-in provides a method for quickly and accurately evaluating the cost of alternate composite materials and manufacturing processes.
Northrop Grumman, for example, Â provided a case study showing how SEER-DFM (Now SEER-MFG) helped make critical decisions and save costs on the Joint Strike Fighter.
Another paper discussed how SEER-DFM provides cost savings for aircraft design.
“Galorath’s Composites Affordability Initiative (CAI) model, which is sold separately as an add-in to SEER-DFM (AKA SEER-MFG), provides the most detailed and flexible modeling environment. This model is aerospace-focused, and offers state-of-the-art composites modeling. The CAI plug-in includes Composites Operations, Cure and Trim. Each of these three is treated as a distinct work element type, providing a great level of detail and modeling flexibility. The CAI plug-in also includes non-composite models: Fitup, Drill Operations, Fasten, Paste Bond, E-Beam Assembly, 3-D Reinforcement, Sheet Metal and SPF/DB.”
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Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Estimating United Conference Papers Available On the Web
Follow this link to see some of the estimating united papers. it was a great conference, full of useful information. Talks encompassing cost estimating (cost estimation), value engineering, product design, software, and more.
And thanks again to all the speakers and attendees as well as the hospitality of the Manchester United Football (soccer) club. And the Galorath staff whose diligent efforts made this a great success. Presentations will be available for all to download for the next few months, then will be available as part of the Galorath corporate library.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Better Products At better Margins 20 to 40% Cost Price Reduction
I was so impressed with the presentation by one of our speakers at the recent user conference that I bought a copy of his book. In his presentation(and also included on our site, galorath.com) he showed how he saved millions of euros in product costs using target costing, value analysis, and viable cost estimating and SEER.Â
It is wonderful to see forward thinkers applying SEER to save big costs as well as to estimate costs. In his presentation he substantiated savings of 20 to 40% cost price reduction (value improvement) And he does this not be grinding contractors but by working with them to provide substantial cost savings without impinging on their margins.
His book is well worth a read. The abstract follows:
“Many companies experience price pressure as a result of the global marketplace. The advance of technology creates many opportunities adding more innovative new features. Yet these opportunities also seem to drive up costs. How to end the resulting profit squeeze? Many aim for low labor cost countries as a solution.
Our approach is: Use Target Costing and Value Analysis.
Target costing sets allowable costs, derived from the value as perceived by customers, instead of price as a result of cost. Value analysis shows the way where the value of a product is, or where to reduce the cost. One of the key success factors in this approach is Cost Engineering and Cost Estimation. Another is multi disciplinary teamwork between marketers, developers, operations and suppliers.
The structured approach and open communication help achieve astonishing results, typically in the range of 20 to 40% cost price reduction or value improvement.
This book, or better Manual, describes how to apply and implement these methods in an organization, and how to involve suppliers efficiently and effectively via so called Design-in Workshops.”
 It can be purchased for 69 Euros at www.orenda.nl
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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Creative Cost Efficiency Article From 2008 European SEER Users Conference
In his opening speech to the 91 delegates at last April’s conference, Galorath’s Cost Engineering Consultant and former Cost Estimating Engineer at Agusta Westland John Henson explained the ‘back to basics’ approach the company was now taking, the message being that only the application of common sense is required to make the most of its range of products for hardware and software development, manufacturing and IT systems. Addressing representatives from over 50 different companies, both current and prospective users, the conference featured speeches from several users in the field of cost engineering, including representatives from Raytheon, Airbus and BAE Systems, each giving an insight into how the software was being practically applied to current projects.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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SEER Year 1 Savings Over 1.5 Million Euros At Philips Medical
It is exciting to see how Philips medical quantified their first year savings by the application of SEER to reduce costs and ensure a fair price from their outsource partners.
- SEER To Drive Cost Effective Design:
“One of SEER-MFG’s strengths is its ability to influence design decisions, pointing the way to the simplest and most cost-effective solution”. This became evident to Pruijsen’s team during one of the pilot projects when they used SEER-MFG to calculate the cost of the parts for a new patient table. “We discovered that SEER-MFG is an interesting application because if you have a solution in mind it allows you to check on the cost and see alternative technologies,” he said. “A mechanical designer might not consider certain technologies because they are out of his experience. But if you can quickly calculate different scenarios, you can determine their cost impact and the amount of investment needed in areas like tooling. - SEER for Fair Pricing (Should Cost) In Outsource Situations: “They eventually settled on a final price of 350 Euros-about one-third of the original quotation.
“Without SEER-MFG, we might have been satisfied just reducing the price 10 percent to 900 Euros through negotiation. In the end the tolerances for this particular part were found to be much higher than necessary; the lower specifications allowed the supplier to significantly reduce his price. Of great impact and as a reflection back to our engineers is, that with SEER-MFG you directly can show the cost impact of the tolerances, technology and materials they choose, and then discuss what is good enough. This really drives costs down during the design stages.”
- SEER Viable Parts Estimates In Minutes:
“After we showed Galorath a drawing of a random part, 15 minutes later we had an estimate on the tooling cost. Four days later we got a quotation on the tool. The SEER estimate was within 2% of the quote.”
The full Philips case study may be found here. Note SEER-MFG was formerly called SEER-DFM. It provides insight on how to design parts and systems for the most cost effective manufacturing.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
New SEER Functionality, Like a Kid in a Candy Store
It is interesting as the company has grown over the years and as i have gotten further and further from day to day software requirements and design, to see some of the amazing functionality coming out of our development group. Sometimes it makes me feel like a kid in a candy store.
I was struck by the newest version of the metrics and benchmarking. A Histogram in addition to a scatter plot. This is so handy. And nearly a surprise to me. (I did know they were doing it but didn’t see it until beta time)
I see some of the global estimation abilities that have gone into SEER for Hardware Electronics and Systems. Very nice!!!. Makes trades even faster. And these I didnt know about until they were in the shipping product.
For SEER for IT, the newest scenario functionality is beautifully executed. Generate an entire IT system estimate by using a pattern and answering a few questions. I never saw this improved version until release.
And the Far out project… estimates unmanned spacecraft far out into the future. i just played with it a few weeks ago. It was released months ago. Very interesting.Â
Even some of our unreleased projects such as xippr (code name, ask and you can find out details)Â Amazing in its ability to ferret out project issues and potential problems.
And our top secret project… Amazing as I occasionally get glimpses into the builds.
As our processes continue to tighten (ISO 9001:2000 review coming up next month) I will be invited to attend more reviews…  some of the fun surprises will disappear for me. I love seeing SEER evolve. Hats off to the development group.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
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SEER Estimate By Comparison Professional Released To All Users
The SEER Estimate By Comparison (formerly SEER-AccuScope) comes in two flavors, the core and the professional. The professional version allows estimation of anything, such as
- total system cost
- software size
- hardware weight
- system value
- server capacity
- best choice from a set of alternatives
This new feature incorporates sophisticated mathematics for uncertainty and estimation.
For the first year Galorath is providing the professional version to all SEER users. Beginning the second year the professional functionality will be available as an upgrade.
Galorath recommends using an industrial strength database for an enterprise but will allow Microsoft Access for simple desktop installations.
This feature began shipping with the release of SEER for Software 7.3, in October, 2008.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.