Prelims
Cost Engineering and Pricing in Autonomous Manufacturing Systems
ISBN: 978-1-78973-470-6, eISBN: 978-1-78973-469-0
Publication date: 12 March 2019
Citation
Fazlollahtabar, H. and Saidi-Mehrabad, M. (2019), "Prelims", Cost Engineering and Pricing in Autonomous Manufacturing Systems, Emerald Publishing Limited, Leeds, pp. i-xv. https://doi.org/10.1108/978-1-78973-469-020191010
Publisher
:Emerald Publishing Limited
Copyright © 2019 Emerald Publishing Limited
Half Title Page
Cost Engineering and Pricing in Autonomous Manufacturing Systems
Title Page
Cost Engineering and Pricing in Autonomous Manufacturing Systems
Hamed Fazlollahtabar
Department of Industrial Engineering, School of Engineering, Damghan University, Iran
Mohammad Saidi-Mehrabad
Faculty of Industrial Engineering, Iran University of Science and Technology, Iran
United Kingdom – North America – Japan India – Malaysia – China
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Emerald Publishing Limited
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First edition 2019
Copyright © 2019 Emerald Publishing Limited
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A catalogue record for this book is available from the British Library
ISBN: 978-1-78973-470-6 (Print)
ISBN: 978-1-78973-469-0 (Online)
ISBN: 978-1-78973-471-3 (Epub)
Contents
List of Figures | ix | ||
List of Tables | xi | ||
Preface | xiii | ||
Acknowledgments | xv | ||
Chapter 1 | Introduction | 1 | |
1.1. Autonomous Manufacturing System | 1 | ||
1.2. Costing and Pricing | 3 | ||
1.2.1. Opportunity Cost | 4 | ||
1.2.2. Opportunity Costs and Market Prices | 6 | ||
1.2.3. Price | 6 | ||
Chapter 2 | Concepts of Costing in Automation | 9 | |
2.1. Overview | 9 | ||
2.2. Introduction and Related Works | 10 | ||
2.3. Model Development | 12 | ||
2.3.1. Key Dimensions for Managing Automation Supply Complexity | 12 | ||
2.3.2. Reference Automation Agent Architecture Model | 14 | ||
2.4. New Paradigm: The Use of Automation Resources | 17 | ||
2.4.1. Economic Aspects of the Automation Life Cycle | 17 | ||
2.4.2. Maximum Benefit of the Product Life Cycle | 19 | ||
2.5. Data Integration Model | 20 | ||
2.5.1. Costs and Benefits of IS | 21 | ||
2.5.2. Balancing Benefits against Implementation Costs | 21 | ||
2.6. Discussions and Concluding Remarks | 22 | ||
Chapter 3 | Concepts of Pricing in Automation | 25 | |
3.1. Overview | 25 | ||
3.2. Introduction and Related Works | 25 | ||
3.3. Model Development | 29 | ||
3.3.1. Automation Energy Pricing Model | 30 | ||
3.3.2. Concession Pricing Model | 32 | ||
3.3.3. Representative Automation Pricing Methods | 36 | ||
3.4. Discussions and Concluding Remarks | 41 | ||
Chapter 4 | Cost Parameters and Costing Models in Autonomous Manufacturing | 43 | |
4.1. Overview | 43 | ||
4.2. Introduction and Related Works | 43 | ||
4.3. Cost Accounting Concept | 45 | ||
4.3.1. Documenting Cost Accounting Policies | 46 | ||
4.4. Cost Object | 47 | ||
4.5. Manufacturing Costs | 51 | ||
4.6. Costing Model Development | 53 | ||
4.7. Application Study | 55 | ||
4.8. Discussions and Concluding Remarks | 62 | ||
Chapter 5 | Cost Engineering in Autonomous Manufacturing | 65 | |
5.1. Overview | 65 | ||
5.2. Introduction and Related Works | 65 | ||
5.3. Cost Engineering | 72 | ||
5.4. Cost-Minimization/Profit Maximization | 72 | ||
5.4.1. Short-run Cost Minimization | 74 | ||
5.4.2. Long-run Cost Minimization | 75 | ||
5.4.3. Application Study | 75 | ||
5.4.4. Cost Functions | 77 | ||
5.5. Cost of Quality | 81 | ||
5.5.1. Application of CoQ in Autonomous System | 83 | ||
5.6. Discussions and Concluding Remarks | 87 | ||
Chapter 6 | Cost and Price in Autonomous Manufacturing | 89 | |
6.1. Overview | 89 | ||
6.2. Introduction and Related Works | 89 | ||
6.3. Model Development | 93 | ||
6.3.1. Time-varying Pricing | 94 | ||
6.3.2. Production Function | 97 | ||
6.3.3. Electricity Cost Function | 99 | ||
6.3.4. Labor Cost Function | 101 | ||
6.4. Manufacturing Profit Maximization | 102 | ||
6.5. Example | 103 | ||
6.6. Discussions and Concluding Remarks | 105 | ||
Chapter 7 | Pricing Models in Autonomous Manufacturing | 107 | |
7.1. Overview | 107 | ||
7.2. Introduction and Related Works | 107 | ||
7.3. Model Development and Analysis | 110 | ||
7.4. Discussions and Concluding Remarks | 114 | ||
Chapter 8 | Price Optimization in Autonomous Manufacturing | 117 | |
8.1. Overview | 117 | ||
8.2. Introduction and Related Works | 117 | ||
8.3. Smart Manufacturing | 121 | ||
8.4. Pricing in Manufacturing | 123 | ||
8.4.1. Profitable Selling | 125 | ||
8.4.2. Cost System for Advanced Manufacturing Systems | 126 | ||
8.5. Estimating RWSC | 127 | ||
8.6. Application of the Cost Model | 134 | ||
8.7. Discussions and Concluding Remarks | 135 | ||
References and Further Reading | 137 | ||
Index | 157 |
List of Figures
Fig. 2.1. | Impact of Automation Supply Complexity on Focal Company. | 13 |
Fig. 2.2. | The Switch of the Responsibilities. | 15 |
Fig. 2.3. | The Product Life Cycle. | 18 |
Fig. 2.4. | The Course of the Cost and Benefit in the Product Life Cycle. | 19 |
Fig. 3.1. | Comprehensive Structure for Pricing in Automation Projects. | 32 |
Fig. 3.2. | Concession Pricing Parameters of Automation Projects. | 34 |
Fig. 3.3. | Causal Loop Diagram for Concession Pricing of Automation Projects. | 35 |
Fig. 3.4. | Equivalent Marginal Cost Pricing (Emcp) Model in Automation Pricing. | 39 |
Fig. 3.5. | Emcp Model in Automation Pricing. | 40 |
Fig. 4.1. | Dimensions for the Analysis to the Cost Object. | 48 |
Fig. 4.2. | Dimensions for the Analysis Related to the Computations Challenge. | 50 |
Fig. 5.1. | Combination of Robot and Resources for Cost Minimization. | 74 |
Fig. 5.2. | Combination of Robot and Resources for Profit Maximization. | 74 |
Fig. 5.3. | Short-run Cost Minimization with One Fixed Input. | 76 |
Fig. 5.4. | Cost Function Behavior. | 78 |
Fig. 5.5. | Lundvall–Juran Curve Depicting Relationship between Conformance (Prevention) and Nonconformance (Appraisal + Failure) Costs and the Tradeoff Point (Eql). | 82 |
Fig. 5.6. | Type I and Type Ii Errors. | 84 |
Fig. 5.7. | Representation of a Double-stage Acceptance Sampling Flow Diagram. | 85 |
Fig. 5.8. | Schematic Representation of Double-stage Accepting Sampling. | 86 |
Fig. 6.1. | Decomposition of the Profit (a) and the Total Cost (b). | 94 |
Fig. 6.2. | Diagram of a Typical Manufacturing System. | 97 |
Fig. 6.3. | Results of Example 1. | 103 |
Fig. 7.1. | The Price–Demand Curve (One Period). | 111 |
Fig. 7.2. | The Price–Demand Curve (Two Periods). | 111 |
Fig. 7.3. | The Price–Demand Curve (Three Periods). | 112 |
Fig. 8.1. | Six Pillars of Smart Manufacturing. | 122 |
Fig. 8.2. | A Cost System Supporting Analysis of Advanced Manufacturing Systems. | 127 |
List of Tables
Table 2.1. | Shares of Costs, Revenue, and Benefits of a Manufacturing Cell as an Example (in US$). | 20 |
Table 3.1. | The Summary of Pricing Literature. | 30 |
Table 3.2. | Price Adjustment Coefficient of Reference Cases. | 36 |
Table 3.3. | Energy Pricing Mechanisms in Some Countries. | 38 |
Table 4.1. | Sample Worksheet for Mold Manufacturing Time Calculation. | 57 |
Table 4.2. | Sample Worksheet for Assembly Cost Calculation. | 61 |
Table 4.3. | Parameters Used for High-cost Manufacturing Environment And Low-cost Manufacturing Environment (Hourly Rates). | 62 |
Table 5.1. | Keywords and Combinations. | 69 |
Table 5.2. | AB – Application Area from Costing Method. | 70 |
Table 5.3. | AC – Level of Integration Between Costing Methods and Production Process. | 71 |
Table 5.4. | AD – Advantages Resulting from the Application of Costing Methods. | 71 |
Table 5.5. | AE – Difficulties in the Deployment and Utilization of Costing Methods. | 73 |
Table 6.1. | Typical Pricing Profiles in New York, Usa. | 95 |
Table 6.2. | Typical Tou and Cpp Pricing Profiles in California, Usa. | 96 |
Table 8.1. | Computer System Functions for Automated Manufacturing. | 120 |
Table 8.2. | Five Cases Considered for Failure Cost Estimation. | 131 |
Preface
Automation will substantially disrupt markets throughout the economy in the coming decade, ranging from construction to financial services. By understanding how technological changes will impact these markets, businesses can take advantage of the situation. Most importantly, buyers should be aware that those falling wages costs will help slow price growth in these markets, potentially providing the flexibility to delay purchasing decisions. Due to high tendency in employing high-tech machines and devices in industry and with respect to extensive consideration in automation, it is significant to investigate specific problems and challenges related to autonomous systems. However, such expensive systems require large amount of economic investment. Thus, identifying cost factors, analyzing them, and developing engineering paradigms for control and optimization need to be studied. Engineering design impacts whole-life cost of products produced. Understanding true cost of a product and the cost drivers during the design stage could guide the design process to obtain more competitive solutions. Cost engineering is concerned with cost estimation, cost control, business planning and management, profitability analysis, cost risk analysis and project management, planning, and scheduling. There are many different approaches and methods for estimating or assessing costs, all of which have advantages and disadvantages under particular circumstances. Cost estimating helps companies with decision making, cost management, and budgeting with respect to product development. It is the start of the cost management process. Cost estimates during the early stages of product development are crucial.
Also, to have more productive system and to obtain profit, appropriate pricing models should be developed to handle the operational costs in autonomous manufacturing systems. Price is one of the most flexible elements of the marketing mix, which interferes directly and in a short term over the profitability and cost effectiveness of a company. In fact, businesses can combat the destructive pricing environments that result from increased competition and globalization by implementing a more strategic pricing approach. This method provides businesses with the ability to maximize profit by providing visibility to pricing sensitivity – allowing you to maximize price in every transaction.
Therefore, both academicians and practitioners can find the book helpful. Graduate students can use the book as a course textbook or as further reading source. Industrial practitioners can learn significant concepts and applied models to be employed in real cases investigations and implementations.
Therefore, this book encompasses variety of topics in cost analysis for autonomous systems and pricing models. Different topics such as scheduling costing, agent-based costing, cost parameters of an advanced manufacturing system and operations planning with respect to cost management and cost minimization are considered in the book. Also, due to high competitive market and profit aspects, pricing concepts and models for autonomous manufacturing systems are developed. The models are novel and adapted based on autonomous manufacturing systems. Some of the distinct properties of the book are listed as follows:
A pioneer book in cost engineering for autonomous systems.
Introducing cost parameters, elements, and optimization models.
Pricing models adapted for autonomous manufacturing.
This book covers several general and technical concepts involved in optimal decision making for manufacturing systems and also the use of autonomous systems as industrial automation for both researchers and executive managers. The book can be employed as a course book in graduate studies of industrial and systems engineering, operations management, logistics, etc.
Structure of the book and the materials in each chapter are further explained here.
In Chapter 1, an overview of the book and significance of the concepts considered in the book are given. In Chapter 2, the basics of costing and different cost models are explained within a scheduling problem in advanced manufacturing system. In Chapter 3, pricing models are discussed in detail and a case is investigated. Analytical studies on the performance of the pricing models in different conditions are also included. In Chapter 4, various cost parameters in manufacturing systems and costing models are reported and detailed in a case problem where specific data are extracted and a costing model is implemented. The impact of each cost parameter is also analyzed. In Chapter 5, cost minimization is discussed with respect to engineering paradigm in product design and manufacturing planning. In Chapter 6, cost/price interaction for profit modeling is handled. Profit maximization is a common goal of manufacturing needing to consider both cost and price at the same time. In Chapter 7, pricing model for advanced systems is detailed and implemented for a specific system. In Chapter 8, price optimization with respect to costs is modeled for an advanced manufacturing system. The model considers a comprehensive set of parameters and provides a generic framework for other systems.
Acknowledgments
We would like to express our gratitude to the many people who saw us through this book; to all those who provided support, talked things over, read, wrote, offered comments, allowed us to quote their remarks and assisted in the editing, proofreading, and design.
We would like to thank Iran National Elites Foundation and Damghan University for enabling us to publish this book. Above all, we want to thank our families, who supported and encouraged us in spite of all the time it took us away from them. It was a long and difficult journey for them.
Our specific thanks to Iman Dadashpour and Ahmadreza Rostami for their warm and effective cooperation in preparing the materials of the book in different stages. Last and not least, We beg forgiveness of all those who have been with us over the course of the years and whose names we have failed to mention.
Hamed FazlollahtabarMohammad Saidi-Mehrabad
- Prelims
- Chapter 1 Introduction
- Chapter 2 Concepts of Costing in Automation
- Chapter 3 Concepts of Pricing in Automation
- Chapter 4 Cost Parameters and Costing Models in Autonomous Manufacturing
- Chapter 5 Cost Engineering in Autonomous Manufacturing
- Chapter 6 Cost and Price in Autonomous Manufacturing
- Chapter 7 Pricing Models in Autonomous Manufacturing
- Chapter 8 Price Optimization in Autonomous Manufacturing
- References and Further Reading
- Index