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.
- customer requirements
- corporate objectives, mission and culture
- available technology
- research & development
- the role of management
- worker security
- corporate organization
- middle management
- worker motivation
- training / worker abilities
- design engineering
• Current popular planning strategies include,
- 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
- 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?