29. Planning and Analysis



29.1 Factors to Consider


• There are a number of factors in a company which must be considered when evaluating the need for CAD/CAM/CAE/CIM/etc systems. Some of these are listed below,



- company crisis

- markets Niche/Global/Home/ etc.

- competition

- customer requirements


- corporate objectives, mission and culture


- available technology

- research & development

success factors

- the role of management

- worker security

- corporate organization

- unions

- middle management

- worker motivation

- training / worker abilities

- cash

- purchasing

- design engineering

- etc.


• Current popular planning strategies include,

Cost management

- direct costing

- effective capital investments

- space utilization

Cycle time reduction

- continuous flow manufacturing and vendor supply

- pull manufacturing

- business and process reengineering

Market driven quality

- defining market needs

- first to market

- agile manufacturing

- 6 sigma quality


- process

- warehouse

- information


- simplifying and automated processes

- increased information access


• We can draw a chart that illustrates the issues that might be encountered,





29.2 Project Cost Accounting


• When considering the economic value of a decision, one method is the payback period.



• Simple estimates for the initial investment and yearly savings are,



• There are clearly more factors than can be considered, including,

- changes in material use

- opportunity cost

- setup times

- change in inventory size

- material handling change


• The simple models ignore the conversion between present value and future value. (ie, money now is worth more than the same amount of money later)



• Quite often a Rate of Return (ROR) will be specified by management. This is used in place of interest rates, and can include a companies value for the money. This will always be higher than the typical prime interest rate.


• So far we haven’t considered the effects of taxes. Basically corporate taxes are applied to profits. Therefore we attempt to distribute expenses evenly across the life of a project (even though the majority of the money has been spent in the first year). This distribution is known as depreciation.



• Methods for depreciation are specified in the tax laws. One method is straight line depreciation.



• Consider an assembly line that is currently in use, and the system proposed to replace it. The product line is expected to last 5 years, and then be sold off. The corporate tax rate is 50% and the company policy is to require a 17% rate of return. Should we keep the old line, or install the new one?