Original Date: 06/05/2006
Revision Date: / /
Information : Preproduction Bidding Process
The Rockwell Collins Cedar Rapids facility instituted a preproduction bidding process – a formalized method for estimating costs of preproduction units by defining the estimating process to be used as well as the roles, responsibilities, and information required to process the estimate. Implementing this process has enabled the Cedar Rapids facility to realize a 50% reduction in preproduction costs per unit.
The Rockwell Collins Cedar Rapids facility instituted a preproduction bidding process to ensure a consistent and repeatable method for estimating the cost of preproduction units in the Product Transition Integrated Product Team (PTIPT). Prior to implementing the preproduction bidding process, there was not a well-defined way to estimate the cost of preproduction units built in the PTIPT. Typically, the life cycle value stream leader would establish a budget based on inconsistent data and with no request for input from the PTIPT or manufacturing.
The Preproduction Bidding Process is now a formalized procedure that defines the estimating process to be used as well as the roles, responsibilities, and information required to process the estimate. Soon after a request for quote is received, a kickoff meeting is held to engage personnel and make sure they understand the program. A preproduction estimate is then requested, which initiates the formation of a preproduction estimating team and begins the bidding process. The Preproduction Estimating Team includes personnel from program management, engineering, design-to-cost (DTC), material, DTC factory labor, test engineering and a manufacturing IPT leader. A product description is completed by the Engineering Department and includes a bill of material and design information. The product description is analyzed by the Preproduction Estimating Team to develop the manufacturing support costs, the production test equipment, mature material costs, mature labor content, and the calculation of a preproduction multiplier.
The preproduction multiplier adjusts material and labor costs above the mature design cost due to rework, expediting, and other activities associated with new design release and schedules. The multiplier is based on nine factors that help define the complexity of the product and magnitude of the project. The mature material and labor content are then adjusted by the preproduction multiplier to develop the preproduction unit cost, which becomes part of the total bid package that is then processed, priced, and approved.
As a result of implementing the new process, the preproduction multiplier has decreased from 4.5- 5x in 1999 to 1.5- 2.2x today. This equates to over a 50% reduction in the preproduction cost per unit. This system is now consistent and repeatable. It saves time by defining the process so that it does not need to be reinvented for each project, with estimates made on a consistent basis from project to project. The process also fosters communication between the necessary groups such that the product that is being estimated is well-defined. By ensuring that all relevant items are included in each bid and nothing is overlooked, improved accuracy is attained.
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