Page 414 - Design for Six Sigma a Roadmap for Product Development

Design for X 381

TABLE 10.7 Questions to Ask in a Pre–Economic Evaluation of DFE

1. Amount of available funds for financing the project. Will the DFSS team have to
ask for more budgets?
2. What is the minimum attractive rate of return (MARR)? What discount rate should
be used to evaluate the project? What is investment timeframe?
3. What is the economic lifetime of the project?
4. Is the lifetime of the project the same as the customer’s timeframe so that the
investment will prove feasible?
5. What are the operating costs associated with the environmentally friendly design?
For example, in the automotive industry, the escalation rate of fuel is a
consideration. Will fuel inflate at a higher rate than the dollar?
6. Government incentives (federal/state/local). Will any incentives play a role in the
overall economic evaluation?

provisions (Huang 1996). The method employs process action and sen-
sitivity charts to identify and trace significant parameters affecting the
LCC. The ABC method assumes that the design, whether a product,
a service, or a process, consumes activities. This assumption differenti-
ates ABC from conventional cost estimation methods that assume
resources consumption. Let us use the example of a materials-handling
step elimination in manufacturing. A conventional cost method may
translate this cost reduction into reduction of direct labor with an
equivalent amount. The ABC method translates this into elimination
of activities to reduce materials-handling cost, a direct and precise
translation. This assumption made ABC very attractive to modeling
among other spectra of benefits that include superiority of cost tracing,
separation of direct and indirect cost components, higher accuracy, and
alignment to activity-based management systems. The ABC process is
depicted in Fig. 10.9.
The ABC objective is to identify activities in the design life, and then
assign reliable cost drivers and consumption intensities to the activi-
ties. Probability distributions are given to represent inherent cost
uncertainty. Monte Carlo simulation and other discrete-event simula-
tion techniques are then used to model uncertainty and to estimate the
effect of uncertainty on cost. The uncertainty effect can be estimated
by exercising a controlled virtual experiment within the simulation
model. Different commercial simulation methods exist such as Crystal
Ball (usually added to the Microsoft Excel spreadsheet) and
SigmaFlow, derived from the Simul8 platform. SigmaFlow has addi-
tional Six Sigma analysis capabilities. Uncertainty can be modeled in
many ways. We can model uncertainty based on historical data using
probability theory, an incremental design scenario, or we can model
uncertainty subjectively based on experience and fuzzy-set theory