Process Planning and Cost Estimation - Revision history

Sm nadukuru: /* Limitations */

2019-05-06T22:25:39Z

Limitations

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	*''Variable factors:'' Even if the manager has chosen the right method of estimating still there are some external factors that affect the results the of the cost, like change in prices of products, market fluctuation, etc.		*''Variable factors:'' Even if the manager has chosen the right method of estimating still there are some external factors that affect the results the of the cost, like change in prices of products, market fluctuation, etc.


			==References==

			https://en.wikipedia.org/wiki/Cost_estimate

			https://www.project-management-skills.com/project-cost-estimating.html

			https://doit.maryland.gov/SDLC/Documents/Cost_Estimating.pdf

			https://www.pmstudy.com/trainingdocs2/projectcostmanagement.pdf

			https://www.costengineering.eu/blog-article/the-role-of-cost-estimating-in-project-management

			https://sourceable.net/opera-house-named-in-over-budget-hall-of-shame/

			https://asq.org/quality-resources/cost-of-quality

			https://bizfluent.com/info-12057007-advantages-disadvantages-cost-estimation-model.html

			https://link.springer.com/referenceworkentry/10.1007%2F1-4020-0612-8_721

			ebook: Process planning and cost estimation by Dr. V. Jayakumar, 10th edition.

			ebook: Process planning and cost estimation by M. Adithan

			https://www.civilserviceindia.com/subject/Management/notes/process-planning.html

			https://managementstudyguide.com/planning_disadvantages.htm

			ebook: PMBOK_Guide_6th edition

Sm nadukuru: /* Abstract */

2019-05-06T22:23:25Z

Abstract

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	==Abstract==		==Abstract==
	Process Planning and Cost Estimation are two very important and vital parts of any industry or business, either for the public sector or private organization. A process is a set of activities that are carried out in a sequence to reach a goal or target or to obtain the desired product. Any miscalculation ~~or unorganized~~ planning of ~~this process~~ may lead to a loss in terms of money, manpower, time or sometimes even loss of life.		Process Planning and Cost Estimation are two very important and vital parts of any industry or business, either for the public sector or private organization. A process is a set of activities that are carried out in a sequence to reach a goal or target or to obtain the desired product. Any miscalculation in the planning of these processes may lead to some loss in terms of money, manpower, time or sometimes even loss of life.
	Cost estimation is equally important as process planning. It is the initial step in any business or making a budget and also to calculate the profit and loss.		Cost estimation is equally important as process planning. It is the initial step in any business or making a budget and also to calculate the profit and loss.
	Both process planning and cost estimation should go hand in hand for an operation to be executed successfully. And in this article will see the detailed description of both process planning and cost estimation and how they are related to each other.		Both process planning and cost estimation should go hand in hand for an operation to be executed successfully. And in this article will see the detailed description of both process planning and cost estimation and how they are related to each other.

Sm nadukuru: /* Cost estimation and best practices */

2019-05-06T22:19:34Z

Cost estimation and best practices

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	Cost estimation is done throughout the project periodically and there are different cost estimation techniques that are applied which takes various inputs and gives different outputs. You can find detailed information on phases and techniques from the figure below.		Cost estimation is done throughout the project periodically and there are different cost estimation techniques that are applied which takes various inputs and gives different outputs. You can find detailed information on phases and techniques from the figure below.

			[[File:Cost_estimating.jpg\|200px\|thumb\|right\|Phases of Cost estimation]]

	===Tools and Techniques===		===Tools and Techniques===

Sm nadukuru: /* Steps in Process planning */

2019-05-06T22:17:16Z

Steps in Process planning

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	==Steps in Process planning==		==Steps in Process planning==

	~~\begin{figure}~~[H]		[[File:process_planning_procedure.jpg\|200px\|thumb\|right\|Steps in Process planning]]
	~~\centering~~
	~~\includegraphics~~[~~scale=0.3]{Steps_in_Process_planning~~.jpg}
	~~\caption{~~Steps in Process planning}
	~~%\label{fig:demarcation}~~
	~~\end{figure}~~

	'''Step-1: Drawing interpretation''' (Analysis of final product requirements as defined in the engineering design): It is the first step in process planning. The design can either be engineering drawing or CAD design.		'''Step-1: Drawing interpretation''' (Analysis of final product requirements as defined in the engineering design): It is the first step in process planning. The design can either be engineering drawing or CAD design.

Sm nadukuru: /* Cost estimation and best practices */

2019-05-06T22:07:11Z

Cost estimation and best practices

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	Cost estimation is done throughout the project periodically and there are different cost estimation techniques that are applied which takes various inputs and gives different outputs. You can find detailed information on phases and techniques from the figure below.		Cost estimation is done throughout the project periodically and there are different cost estimation techniques that are applied which takes various inputs and gives different outputs. You can find detailed information on phases and techniques from the figure below.

	~~\subsubsection{~~Tools and Techniques}		===Tools and Techniques===

	Expert Judgement: Expert judgment uses experience and knowledge of experts in that particular field of the project for cost estimation. It is the cheapest, easiest and fastest technique. No resources are required for the implementation of this technique and it is used in the beginning phase when less or no data is available.		'''Expert Judgement:''' Expert judgment uses experience and knowledge of experts in that particular field of the project for cost estimation. It is the cheapest, easiest and fastest technique. No resources are required for the implementation of this technique and it is used in the beginning phase when less or no data is available.

	For eg: Estimating the cost of a small and simple project.		For eg: Estimating the cost of a small and simple project.
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	Disadvantages with this technique are that it is very hard to find an expert for the specific project and also that it can be easily biased.		Disadvantages with this technique are that it is very hard to find an expert for the specific project and also that it can be easily biased.

	Top-down Estimation: Top-down estimation takes historic data from earlier projects which are similar, as a basis for estimating cost. It is used in the early phase of the project when the availability of data is limited. This is one of the least expensive methods.
			'''Top-down Estimation:''' Top-down estimation takes historic data from earlier projects which are similar, as a basis for estimating cost. It is used in the early phase of the project when the availability of data is limited. This is one of the least expensive methods.

	For eg: Cost estimation for making an online platform for a company. For this, the cost estimator can use the data generated while making the online platform for another company.		For eg: Cost estimation for making an online platform for a company. For this, the cost estimator can use the data generated while making the online platform for another company.
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	The disadvantage of this technique is that the results obtained are not reliable and accurate compared to others.		The disadvantage of this technique is that the results obtained are not reliable and accurate compared to others.

	Parametric Estimation: Parametric estimation utilizes statistical modeling and historical data of the key drivers to develop cost estimation. It is a fast and also cheap method. It is a more accurate technique compared to Top-down and Expert judgement methods.
			'''Parametric Estimation:''' Parametric estimation utilizes statistical modeling and historical data of the key drivers to develop cost estimation. It is a fast and also cheap method. It is a more accurate technique compared to Top-down and Expert judgement methods.

	The disadvantage of this technique is that its accuracy lies in the correctness of the data used.		The disadvantage of this technique is that its accuracy lies in the correctness of the data used.

	~~3-Point Estimation: 3-Point estimation is derived from PERT (Program Evaluation and Review Technique). This technique uses 3 estimates to define the final cost;~~

	Most likely cost (Cm):- the estimated cost if everything is executed as planned.		'''3-Point Estimation:''' 3-Point estimation is derived from PERT (Program Evaluation and Review Technique). This technique uses 3 estimates to define the final cost;
	Pessimistic cost (Cp):- the estimated cost in the worst case scenario, when nothing goes according to the plan and the cost is very high compared to the budget.
	Optimistic cost (Co):- the estimated cost in the best case scenario, when everything works much better than the actual plan. In this case, the cost is very less than the budget.		''Most likely cost (Cm):- the estimated cost if everything is executed as planned.

			''Pessimistic cost (Cp):- the estimated cost in the worst case scenario, when nothing goes according to the plan and the cost is very high compared to the budget.

			''Optimistic cost (Co):- the estimated cost in the best case scenario, when everything works much better than the actual plan. In this case, the cost is very less than the budget.

	~~Formulae: Cost_estimation = (Co+4Cm+Cp)/6~~

			<math>Formulae: Cost_estimation = (Co+4Cm+Cp)/6</math>


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	Disadvantages with this method are, instead of one, there are three estimates to be done. It needs more work and more time. And there are chances that everything can go wrong.		Disadvantages with this method are, instead of one, there are three estimates to be done. It needs more work and more time. And there are chances that everything can go wrong.

	Bottom-up Estimation: Bottom-up estimation takes the estimates from individual work collections and then combines them to give a final estimate. It is one of the most accurate methods of estimation since it focuses on the cost from a very deep perspective. In this process, the project is fragmented down to smaller activities and more detailed. The more the activities are detailed, the more accurate will be the results. This is the best technique among all other cost estimation methods.
			'''Bottom-up Estimation:''' Bottom-up estimation takes the estimates from individual work collections and then combines them to give a final estimate. It is one of the most accurate methods of estimation since it focuses on the cost from a very deep perspective. In this process, the project is fragmented down to smaller activities and more detailed. The more the activities are detailed, the more accurate will be the results. This is the best technique among all other cost estimation methods.

	The only disadvantage which this method is that it takes more time than any others which might result in spending more money. Also, it can be difficult to use this method for complex projects.		The only disadvantage which this method is that it takes more time than any others which might result in spending more money. Also, it can be difficult to use this method for complex projects.

	Reserve Analysis: Reserve analysis takes uncertainty into account and determines how much contingency reserves should be assigned to the project. This amount is accounted for uncertainty cost. It can be a fixed value, or a percentage of the cost estimated or can be calculated separately. This is a form of buffer cost.

	Cost of Quality (CoQ): This includes the amount spent during the project to avoid failure that might happen and also the money spent before and after the project is done, due to the failures. It is a methodology that helps the organization or business to estimate the extent to which their resources are utilized. This also determines the potential savings that can be gained by implementing process improvement steps.		'''Reserve Analysis:''' Reserve analysis takes uncertainty into account and determines how much contingency reserves should be assigned to the project. This amount is accounted for uncertainty cost. It can be a fixed value, or a percentage of the cost estimated or can be calculated separately. This is a form of buffer cost.


			'''Cost of Quality (CoQ):''' This includes the amount spent during the project to avoid failure that might happen and also the money spent before and after the project is done, due to the failures. It is a methodology that helps the organization or business to estimate the extent to which their resources are utilized. This also determines the potential savings that can be gained by implementing process improvement steps.


	Vendor Bid Analysis: This is the last technique. Vendor bid analysis is used to calculate the cost of the project by comparing the bids quoted by the vendors. This method is used when the product is provided by the vendor or the service is outsourced.		'''Vendor Bid Analysis:''' This is the last technique. Vendor bid analysis is used to calculate the cost of the project by comparing the bids quoted by the vendors. This method is used when the product is provided by the vendor or the service is outsourced.

	A disadvantage with this method is that it relies completely on the capability and knowledge of the vendor.		A disadvantage with this method is that it relies completely on the capability and knowledge of the vendor.

Sm nadukuru: /* Why to perform cost estimation? */

2019-05-06T22:03:19Z

Why to perform cost estimation?

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	Cost estimation is done while dealing with a project whose outcome is uncertain. Cost estimation is directly linked to the different phases of the project life cycle. They are:		Cost estimation is done while dealing with a project whose outcome is uncertain. Cost estimation is directly linked to the different phases of the project life cycle. They are:

	Conceptual: How much the project will cost? How much time it will take for the project to be done?		'''Conceptual:''' How much the project will cost? How much time it will take for the project to be done?

	Planning: Defines the activities involved in the process of completing the project.		'''Planning:''' Defines the activities involved in the process of completing the project.

	Execution: While implementing those activities from the planning phase of the project.		'''Execution:''' While implementing those activities from the planning phase of the project.

	== Cost estimation and best practices ==		== Cost estimation and best practices ==

Sm nadukuru: /* Introduction */

2019-05-06T22:02:14Z

Introduction

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	''It is the act of creating detailed work instruction from design data for making a component.		''It is the act of creating detailed work instruction from design data for making a component.

	===Purpose===		==Purpose==

	*''To link design and manufacturing.		*''To link design and manufacturing.
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	===Principles of Process Planning===		==Principles of Process Planning==

	*''Define the outputs, and then pin down and make the list of inputs needed for reaching these defined outputs.		*''Define the outputs, and then pin down and make the list of inputs needed for reaching these defined outputs.
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	===Scope of process planning===		==Scope of process planning==

	A process is defined as a group of activities specific to achieve an output of an operating system in accordance with the defined measure of effectiveness.		A process is defined as a group of activities specific to achieve an output of an operating system in accordance with the defined measure of effectiveness.
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	'''Cost reduction:''' Various opportunities will be available in cost reduction while performing the planning process.		'''Cost reduction:''' Various opportunities will be available in cost reduction while performing the planning process.

	===Steps in Process planning===		==Steps in Process planning==

	\begin{figure}[H]		\begin{figure}[H]
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	'''Step-8: Communicating the manufacturing knowledge to the other departments:''' This is the final step in process planning that establishes communication between the different departments who need knowledge on the manufacturing of the product. It helps in ensuring that the selected process is the most economical way possible. This also assists in improving quality.		'''Step-8: Communicating the manufacturing knowledge to the other departments:''' This is the final step in process planning that establishes communication between the different departments who need knowledge on the manufacturing of the product. It helps in ensuring that the selected process is the most economical way possible. This also assists in improving quality.

	===Limitations of Process planning===		==Limitations of Process planning==

	Even though there are many advantages of process planning, there are a few limitations to it as well. They are:		Even though there are many advantages of process planning, there are a few limitations to it as well. They are:

Sm nadukuru: /* Introduction */

2019-05-06T22:00:05Z

Introduction

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Sm nadukuru: /* Why to perform cost estimation? */

2019-05-05T12:07:16Z

Why to perform cost estimation?

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	There are many factors that are involved in cost estimation:		There are many factors that are involved in cost estimation:
	Labor
	Materials		*''Labor
	Machines		*''Materials
	Equipment and facilities		*''Machines
	Services		*''Equipment and facilities
	Contingency costs		*''Services
			*''Contingency costs

	Cost estimation is done while dealing with a project whose outcome is uncertain. Cost estimation is directly linked to the different phases of the project life cycle. They are:		Cost estimation is done while dealing with a project whose outcome is uncertain. Cost estimation is directly linked to the different phases of the project life cycle. They are:

Sm nadukuru: /* Limitations */

2019-05-05T10:17:22Z

Limitations

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	== Limitations ==		== Limitations ==


	Cost estimation has a number of strengths which we have learned in the previous parts. But it also has a few weaknesses and limitations.		Cost estimation has a number of strengths which we have learned in the previous parts. But it also has a few weaknesses and limitations.


	*''Flexible areas of calculation, efficiency and cost control'' When there are so many models to estimate cost, with different features and different ways of providing data, it is very difficult to choose the right model for the right estimation.		*''Flexible areas of calculation, efficiency and cost control'' When there are so many models to estimate cost, with different features and different ways of providing data, it is very difficult to choose the right model for the right estimation.