Special issue on Through Life Cost estimating

Through Life Cost (TLC) estimating is a major challenge for many industries, especially those where the products are of high value and have long life cycles. The long life cycles associated with assets such as aircraft and ships cause much uncertainty, especially when predicting the in-service/utilisation phase costs which often represent the majority of cost. In parallel to this the long-life systems, which are usually full of electronic systems have the further challenge of obsolescence (see Prabhakar and Sandborn this issue). This has led to a fundamental change in business models in an effort to realise the full potential of such assets, whilst managing their TLCs. Industrial sectors such as aerospace, defence, utilities, oil and gas have moved from providing the asset or product, to providing a service or capability, through contractual provisions such as performance-based outcomes. Even traditional manufacturing companies (e.g., General Electric, Samsung, Siemens, and IBM) are moving from selling products to providing services.

With this paradigm shift in business processes, companies no longer sell the asset; instead the asset becomes part of a service offering. In order to estimate the TLC, it will be necessary to offer a paradigm shift in the way we undertake the estimation process. One proposed solution is to integrate the TLC estimation process as a systems-based approach. This will ensure that rather than focus on either the asset or the service, part of a product service system, we actually focus on the system as a whole and consider the people, products, and processes throughout the life cycle (Wang et al. this issue) and the Costing for Avionic Through-Life Availability (CATA) project funded by the Innovative electronics Manufacturing Research Centre (IeMRC).

Hence, to support the way forward in TLC estimating, a special issue was organised to ascertain the current state of the art and state of the practice. The aim of this special issue was to invite researchers and industrialists to submit papers that reflected the whole life cycle of products, product-service systems, and service. Typical lifecycle stages are depicted in Figure 1. While this traditionally focuses on assets, it is also applicable to services. In summary, there are the initial design stages, then development, manufacture, in-service (utilisation and support), and disposal.

Figure 1. Traditional life-cycle stages.

The 11 papers for this special issue focus on particular stages of the lifecycle, although some of the proposed approaches may be suitable across the life cycle. This editorial provides an overview of these papers and how they fit with the latest thinking in TLC estimating.

Current industrial and academic context

Currently we are moving from estimating the cost of physical durable assets and moving towards performance-based contracting, or paying for a capability or service. Figure 2 illustrates the current state-of-the-art for this shift in industrial business processes, where the top two boxes illustrate that the current product cost estimating techniques are being adapted for service cost forecasting. In general, the papers presented in this special issue reflect this current state of the art.

Figure 2. The current state of the art – adapting product cost for service.

Special issue paper groupings

The special issue papers have been grouped as follows:

The paper led by Xu ‘Cost engineering for manufacturing: current and future research’ provides a report from a research meeting where a number of academic institutes presented their activities and what they perceived to be the future challenges in cost estimating. This paper provides a summary of the academic thinking in 2009–2010.

The next few papers illustrate examples of applying cost estimation techniques in the manufacturing phase of an asset. Sundkvist et al. in `A model for linking shop floor improvements to manufacturing cost and profitability' focus on the impact of manufacturing shop floor improvements in terms of manufacturing cost and profitability. Whilst Jin et al. in ‘An integration methodology for automated recurring cost prediction using digital manufacturing technology’, also examine the assembly costs as well as the manufacturing costs. In their paper they use the uplock and apron assembly for one of Bombardier's current regional passenger jets as their exemplar. The emphasis, however, is not on achieving the cost estimate, but more on how the cost estimating process can be integrated into digital manufacturing, and hence, assisting in lifecycle decisions throughout the whole process. Jin et al. provide the first step in identifying the importance of data, information, and knowledge. Yeh and Deng then examine how machine learning can be used to improve the accuracy of the cost estimates. The exemplars used to demonstrate the approach build on product cases used in previous research, namely estimating the cost of the bending process for a steel pipe and the material costs of a carbon steel pipe. Their findings were that using machine learning approaches, such as Back Propagation Neural Networks; one can attain improved accuracy compared with conventional regression analysis.

The remaining papers focus on estimating the in-service costs for an asset and the challenges that sectors face in terms of affordability of long-life products and services. Waghmode and Sahasrabudhe describe how to estimate the maintenance and repair costs for repairable systems. They propose a life cycle cost modelling approach and offer their view of a life cycle cost model. They include attributes such as acquisition, although the main focus is on preventative maintenance, rates of failure using Mean Time Between Failure. They follow the current state as depicted in Figure 2. Verhagen et al. then, whilst in collaboration with a range of industrialists examine the use of ‘Knowledge-based cost modelling of composite wing structures’. The aim of their research is to provide a knowledge-based cost estimating approach for composite part evaluation. What is exciting about this paper is the identification on the importance of knowledge and how the authors have validated their approach. Importantly, they identify the need to have life-cycle management of the knowledge not just the product.

Prabhakar and Sandborn then describe total Cost of Ownership (TCO) in the paper ‘A part total cost of ownership model for long life cycle electronic systems’. They examine the life-cycle costs with their particular focus being on the impacts of any supply chain constraints or disruptions upon the part. The part they use to demonstrate the TCO model is a surface mount capacitor. They illustrate their approach where they model the part from its initial entry into the product design through the final products life. Their findings show that effort is often placed on procurement savings. However, for electronic parts, cost avoidance through managing the part throughout its lifecycle need to be considered when determining the most appropriate part procurement.

The in-service stage of the asset becomes more challenging when one considers affordability as described by Bankole et al. in their paper ‘Product–service system affordability in defence and aerospace industries: state-of-the-art and current industrial practice’. They discuss both qualitative and quantitative factors when examining ways of identifying the affordability challenges from three perspectives; namely; the customer (affordability), the supplier (sustainability) and the manufacturer (profitability). The outcome from their work is the qualitative and qualitative factors that would influence the three perspectives from the view of sustaining the product, not from the service perspective.

To illustrate the additional requirements of the ‘service’, Huang et al. offer a view on how to estimate the in-service costs by proposing an ‘adaptation of product cost estimation techniques to estimate the cost of service’. The authors analyse how four key product cost estimation techniques namely; intuitive, analogical, parametric and analytical could be enhanced/adapted to estimate the service costs for a product/system. They then describe the selection of the approach and their future research where their proposed approaches are being assessed via an industrial case study.

Wang et al. in their paper ‘Harmonising software engineering and systems engineering cost estimation’ examine the gaps and overlaps between software engineering and systems engineering cost models with intent to harmonise the estimates for project estimation. In particular, they evaluate the constructive cost model II and constructive systems engineering cost model and provide guidelines on how to reconcile and resolve the identified gaps and overlaps.

The final paper in this special issue describes a framework which was created for use by the North Atlantic Treaty Organisation (NATO) entitle ‘A North Atlantic Treaty Organisation framework for Life Cycle Costing’ by Smit. The article presents the findings to date of NATO RTO SAS studies to develop a framework for life cycle cost analysis in a multinational environment. This especially in the current economic and multi-national agreements is an important area to consider. First, Smit describes the creation of a generic life cycle cost breakdown structure under NATO RTO SAS-028. He then describes how the team at NATO defined the methods and models for use in the framework and the development of the life-cycle costing guide.

We hope that this collection of papers provides a representative sampling of the latest thinking in the area of through life costing. The editors have identified that with the change in business processes being adopted in practice, further research is required to achieve a similar step-change in the way TLC estimating is undertaken. This process is underway and we are looking forward to receiving papers, which reflect the paradigm shift required and offer solutions to this.