Managing the costs of new product development projects: a longitudinal case study at an automotive company

The overarching research topic of this dissertation is the management of the costs of new product development projects. New product development (hereinafter NPD) is essential for most companies, as the introduction of innovative products is crucial for their long-term success. Due to the high level of uncertainty that comes with the innovative process of product development, the management of NPD costs is a highly challenging task. We illuminate the field of NPD cost management from two perspectives, which represent our research topics. The first research topic of this thesis is the estimation of NPD costs. NPD costs are costs triggered by the activities that companies pursue to technically develop new products (i.e., labor costs of engineers, project managers, designers, and quality assessors, costs for tools and software required in NPD, costs of material and components required for testing and prototyping, and NPD-related overhead costs). Many authors have presented methods for product cost estimation in general, mostly focusing on overall product costs or direct material costs. Limited research is available about the estimation of the specific cost type of NPD costs. We conduct three studies to contribute to this gap. First, we give an overview of the status quo regarding NPD cost estimation. We do this by conducting a systematic literature review on methods for this purpose. Second, we develop and present the NPD cost benchmarking method. With this method, which is mostly built on external data, we add a new approach to the literature on NPD cost estimation methods. As third study in the context of NPD cost estimation, we present a case study in which we provide detailed, empirical insights on the challenges in NPD cost estimation, and on the application of the NPD cost benchmarking method in particular. The second research topic of this thesis concerns decision-making processes during NPD projects. In this uncertain and dynamic environment, decision-makers often rely on heuristics to choose between alternative options for responding to unpredicted developments during NPD projects (for example, changes in market demands, technical challenges, or new information about competitors). Empirical insights are mostly missing about how such decisions are made. Our fourth study provides insights on the use of heuristics in ongoing NPD project managerial decision-making by conceptualizing and empirically testing the within-project NPD cost compensation heuristic. This dissertation was supervised by Prof. Dr. Marc Wouters from KIT’s chair of Management Accounting at the Institute of Management. It is written in English language and the author aims to obtain the title of Dr. rer. pol

Welcome to OR&S! Where students, academics and professionals come together

In this manuscript, an overview is given of the activities done at the Operations Research and Scheduling (OR&S) research group of the faculty of Economics and Business Administration of Ghent University. Unlike the book published by [1] that gives a summary of all academic and professional activities done in the field of Project Management in collaboration with the OR&S group, the focus of the current manuscript lies on academic publications and the integration of these published results in teaching activities. An overview is given of the publications from the very beginning till today, and some of the topics that have led to publications are discussed in somewhat more detail. Moreover, it is shown how the research results have been used in the classroom to actively involve students in our research activities

An Investigation into the Data Collection Process for the Development of Cost Models

This thesis is the result of many years of research in the field of manufacturing cost modelling. It particularly focuses on the Data Collection Process for the development of manufacturing cost models in the UK Aerospace Industry with no less important contributions from other areas such as construction, process and software development. The importance of adopting an effective model development process is discussed and a new CMD Methodology is proposed. In this respect, little research has considered the development of the cost model from the point of view of a standard and systematic Methodology, which is essential if an optimum process is to be achieved. A Model Scoping 3 Framework, a functional Data Source and Data Collection Library and a referential Data Type Library are the core elements of the proposed Cost Model Development Methodology. The research identified a number of individual data collection methods, along with a comprehensive list of data sources and data types, from which essential data for developing cost models could be collected. A Taxonomy based upon sets of generic characteristics for describing the individual data collection, data sources and data types was developed. The methods, tools and techniques were identified and categorised according to these generic characteristics. This provides information for selecting between alternative methods, tools and techniques. The need to perform frequent iterations of data collection, data identification, data analysis and decision making tasks until an acceptable cost model has been developed has become an inherent feature of the CMDP. It is expected that the proposed model scoping framework will assist cost engineering and estimating practitioners in: defining the features, activities of the process and the attributes of the product for which a cost model is required, and also in identifying the cost model characteristics before the tasks of data identification and collection start. It offers a structured way of looking at the relationship between data sources, cost model characteristics and data collection tools and procedures. The aim was to make the planning process for developing cost models more effective and efficient and consequently reduce the time to generate cost models

A Cost Analysis Case Study Of A Small Chinese Manufacturer

This study investigated whether a small firm, China Umbrella Factory Limited (CUFL), and in fact any firm in a developing country (mainland China), could benefit from a formal, activity-based costing system. Many small firms, even more so than larger firms, find themselves particularly vulnerable to competitive challenges because the smaller firms lack the know-how and resources to know their true costs and profit margins. Smaller firms tend to use heuristics, or rules-of-thumb, in their estimation of costs as opposed to the bonafide use of more sophisticated and validated costing systems, whether traditional or activity-based costing (ABC). Comparisons of this firm’s current estimations of costs were made using both of these costing systems. Results indicated differences across the three methods. It was discovered that cost distortions that disfavored the estimation and traditional methods favored the ABC method. Notwithstanding the benefits found with using ABC, the firm decided not to adopt this method. A major constraining factor rested with the limitation of human resources – particularly with training in ABC as well as general management accounting. Furthermore since ABC, in a greater fundamental sense, benefits firms with significant overhead (when measured as a proportion of total cost), ABC would only provide limited benefits relative to the cost of implementation given the low-tech, primarily labor-based nature of this firm and its products

ANNs in ABC Multi-driver Optimization Based on Thailand Automotive Industry

The purpose of this research was to develop a method for Activity Based Costing (ABC) that provided accurate product production costs. ABC using Single Driver Activity Based Costing (SDABC) can result in distortion of the cost. A more accurate ABC cost calculation based on multiple cost drivers (CDs) in each activity has been devised and proven by considering the various cost drivers using the correlation coefficient or R2. The application of artificial neural networks (ANNs) to choose the CDs is Multiple Drivers Activity Based Costing (MDABC). The ANNs choose the CDs by algorithms including Multilayer Perceptron and Back-propagation. The transfer function for hidden layers is the Log-Sigmoid Function and for the output layer is the Pure Linear transfer function. The results have demonstrated that using MDABC results in more accurate cost calculations than when using SDABC. The study found that both of the extended ABC method, SDABC and MDABC provide more accurate actual cost of production, and both are applicable to products with low turnover or those in a state of loss condition. However, MDABC is better used in situations which include a variety of production activities, while the SDABC method is best used in situations of the factory operations not being very complex. Overall, the resolution, or accuracy, of the calculated production costs is better using the MDABC method, but is more complicated in its use and operation. Computer-based ANNs overcome this problem of complexity

An evaluation of vendor selection models from a Total Cost of Ownership perspective.

Many different vendor selection models have been published in the purchasing literature. However there has been no systematic approach to compare the relative efficiency of the systems. In this paper we propose to use the concept of Total Cost of Ownership as a basis for comparing vendor selection models. We illustrate the comparison with real life data set of the purchasing problem of ball bearings at Cockerill Sambre, a Belgian multinational company in the steel industry. Mathematical programming models outperform rating models and multiple item models generate better results than single item models from a Total Cost of Ownership perspective for this specific case study.Evaluation; Models; Selection;

Activity-Based Costing In Small Manufacturing Firms: South African Study

This is an empirical investigation by means of a survey of the experiences and perceptions of activity-based costing (ABC), as an alternative to traditional costing, in small manufacturing firms in the Southern Gauteng region of South Africa. The objectives of the study were to determine the: Extent to which ABC is adopted; Perceptions of the benefits and the barriers of ABC; Experiences regarding the practice of ABC; and Reasons why firms do not adopt ABC. An analysis of 48 questionnaires indicated that 16 firms implemented ABC whilst 32 did not adopt this approach. The study firstly found that the ABC users have been in business significantly longer than the non-users, ABC users’ firms are significantly larger than the non-users firms’, there are some significant differences in the perceptions between the users and non-users regarding the benefits and the barriers of implementing ABC, that the ABC users are to a great extent neutral in respect of the practical issues of ABC and finally, that the non-users of ABC are of the opinion that ABC is too expensive to implement. The contribution of this study is that it fills the gap regarding to the lack of empirical research of ABC in small manufacturing firms and especially the lack of empirical research on ABC in South African firms

Optimizing the use of dedicated and contract transportation assets to maximize total system profit

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2007.Includes bibliographical references (leaf 100).Each week, FruitCo (FC) ships over a thousand containers of fresh fruits to its various port facilities in the US. Once the containers arrive at the port, approximately half of these containers are received by customers while the remaining half is handled by FC and delivered to customers by either a dedicated or contract carrier. For each containers delivered by FC, heuristics and cost-analysis are used to make the carrier decision. Like other shippers with multiple carrier options, FC needs to both maximize profit and preserve service quality. FC's existing decision framework focuses on fronthaul profit for each delivery while its heuristics do not reflect specific service or cost strategies. Additionally, the existence of backhaul revenue, late returns of containers, limits on containers and dedicated drivers, and a variable ship arrival and departure schedule meant that existing decisions were limited in scope and rarely maximized profit for FC's delivery operations (part of port operations) as a whole. In our thesis, we created a new decision framework to maximize FC's container operations at one of its ports, Port A (PA). We grouped containers from a single ship as an interdependent set of deliveries, forming a single cycle.(cont.) Accounting for various constraints and potential backhauls, our optimization maximized the profit of a single cycle. The decisions made by the optimization achieved a weekly profit improvement of over 30% without affecting service quality. Supplementing our model, we conducted a sensitivity analysis on the number of containers and dedicated drivers to provide FC insight into its optimal asset size at PA.by Tae Whee Lee [and] Ronald Po.M.Eng.in Logistic