Process Cost Modeling

Strategic Engineering and Economic Evaluation of Materials Technologies

By Frank Field, Randolph Kirchain, and Richard Roth, Massachusetts Institute of Technology

Production cost is a vital performance metric for engineering and management analysis. Despite its obvious relevance throughout the product development cycle, cost analysis has not been a focus of the design engineer. In part, this is because of some key misunderstandings of what cost is—engineers have not been trained in the techniques that tie manufacturing cost to the technical and design parameters with which they are more comfortable and familiar.

While there have been many calls for a closer relationship between engineering and economic analysis, these key conceptual obstacles, in conjunction with the limits of the computational tools available, have limited the integration of cost analysis into product and process development.

This paper, reprinted here by permission of the Journal of Manufacturing, summarizes the conceptual limitations that need to be overcome and presents a basis for revising the notion of process cost analysis. Moreover, it presents a series of cost analysis cases that demonstrate the way in which the notion of “context” lies at the heart of effective use of engineering cost estimates.