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Original Date: 10/20/1997
Revision Date: 01/18/2007
Best Practice : Design-to-Cost and Affordability Process
Northrop Grumman established a proactive cost reduction program for the F/A-18 E/F program which has become a model for other affordability initiatives within the company. The company has also defined a standard process procedure for affordability/producibility management of the F/A-18 program. Key elements of this procedure include:
Establish baseline and target costs for each component of the aircraft
Construct a database that contains all cost estimate, projection, and affordability data
Assign responsibility for initial and follow-through proposals for each work package, down to the team leader level
Conduct trade studies to identify alternatives and impacts for cost reduction measures
Coordinate and integrate affordability and producibility initiatives
Create affordability status reports
Quantify, track, and validate all savings
Northrop Grumman’s standard process procedure has several different affordability goals or allocations, such as average unit production cost (flyaway cost); initial support investment cost; and operating and support costs. These affordability goals are allocated by the work breakdown structure and flowed down to the team leader level.
The company has tracked and maintained cost baseline and affordability initiatives since 1992. Through cost reduction measures, Northrop Grumman has been able to keep aircraft flyaway and life cycle costs within contractual requirements despite configuration changes and increased material costs. Cost reduction measures have also been responsible for a 10% savings of flyway costs which helped offset a 12% increase in flyaway costs due to configuration and other changes.
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