Massachusetts Institute of Technology. Department of Mater als Science & Engineering. Creating a Process-based Cost Model. Randolph Kirchain & Frank R.
Creating a Process-based Cost Model Randolph Kirchain & Frank R. Field III Materials Systems Laboratory Massachusetts Institute of Technology
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 1
Session Outline • What is a process-based cost model? • Examples of Technical Decisions • Key steps to realizing a model
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 2
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Please read the supplemental document Image removed due to copyright reasons.
Kirchain, R., and F. Field. "Process-Based Cost Modeling:Understanding the Economics of Technical Decisions." In Encyclopedia of Materials Science and Engineering. Vol. 2. San Diego, CA: Elsevier, 2001, pp. 1718-27. ISBN: 0080431526.
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 3
What is an engineering model? What is the purpose of creating such models?
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 4
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Process-based Cost Modeling (PBCM) • Objective – Map From Process Description To Operation Cost
• Purpose – Inform Decisions Concerning Technology Alternatives BEFORE Operations Are In Place Product Description Part Geometry Material Properties Economic Characteristics
PBCM
Production Cost
Operating Conditions
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 5
What is a PBCM? • Implementation: – Process Model – Operations Model – Financial Model
• General: – Incorporates Technical Information About Process • Builds Cost Up From Technical Detail – Must Be Able To Address Implications Of Change In • Product Design or • Process Operation – Incl. Production Volume
• Remember: – The Purpose Of A PBCM Is To Inform Technical Decisions
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 6
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Uses of Cost Models in Technical Decision-making • Comparing options – Materials – Processes – Designs – Exogenous conditions
• Identifying cost drivers • Considering hypothetical developments • Characterizing strategic strengths • Quantifying necessary performance improvements 3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain
Massachusetts Institute of Technology Department of Materials Science & Engineering
Engineering Economic Analysis: Slide 7
Case One: Considering Alternative Structural Materials • Steel Baseline – Honda Odyssey minivan – Complete Body in White : 148 pieces – BIW Weight : approx. 370 kg
• RTM Glass Composite Intensive Vehicle (CIV) – Complete Body in White : 8 pieces, plus steel inserts – BIW Weight : approx. 240 kg – Baseline design uses glass reinforced composites produced by RTM
• Hypothetical Designs – Carbon fiber or SMC Massachusetts Institute of Technology Department of Materials Science & Engineering
From: Kang, P. J. (1996). A Technical and Economic Analysis of Structural Composite Use in Automotive Body-In-White Applications. MS Thesis. Cambridge, Massachusetts Institute of Technology: 170. 3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 8
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Comparison of Body Weights (incl. CIV inserts) Steel
SMC
RTM Glass
Carbon Fiber
0 Bodyside
100 Floorpan
200
Cross Member
Massachusetts Institute of Technology Department of Materials Science & Engineering
400
300 Front End
Roof
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 9
Uses of Cost Models in Technical Decision-making • Comparing options – Materials – Processes – Designs – Exogenous conditions
• Identifying cost drivers • Considering hypothetical developments • Characterizing strategic strengths • Quantifying necessary performance improvements Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 10
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Comparing Manufactured Costs: Process-based models provide insight into novel options Total Parts Production & Assembly Cost
Unit Cost per Body
$2,500
Steel RTM Glass SMC
$2,000
$1,500
$1,000 10
20
40 50 60 70 30 Annual Production Volume (000s)
Massachusetts Institute of Technology Department of Materials Science & Engineering
80
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 11
Uses of Cost Models in Technical Decision-making • Comparing options – Materials – Processes – Designs – Exogenous conditions
• Identifying cost drivers • Considering hypothetical developments • Characterizing strategic strengths • Quantifying necessary performance improvements Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 12
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BIW Cost Breakdown at 35,000 parts/year $2,000 $1,800 $1,600 Other Fixed Tooling Equipment Energy Labor Materials
$1,400 $1,200 $1,000
$800 $600 $400 $200 $0 Steel
RTM
Massachusetts Institute of Technology Department of Materials Science & Engineering
SMC 3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 13
Uses of Cost Models in Technical Decision-making • Comparing options – Materials – Processes – Designs – Exogenous conditions
• Identifying cost drivers • Considering hypothetical developments • Characterizing strategic strengths • Quantifying necessary performance improvements Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 14
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Comparing Cost Performance in Individual Subsystems $800 Steel: 57 parts RTM: 2 parts + 20 inserts SMC: 9 parts + 20 inserts
$700
Floorpan / Cross member
$600 $500 Steel
$400
5
25
R TM 45
SMC 5% 65
85
$200 105
Annual ProductionVolume (x 1000)
125
Steel: 9 parts RTM: 2 Parts SMC: 1 Part
145
$150
$100
Roof $50 5
25
45
65
85
105
125
145
Annual Production Volume (x 1000) Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 15
Hybrid Body Scenarios $2,200 $2,000
Steel
$1,800
Hybrid 5%
$1,600
Hybrid 30% RTM
$1,400
SMC
$1,200 $1,000
5 25 45 65 85 105 125 145 Annual Production Volume (x 1000) Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 16
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Case Two: Investigating Early Stage Developments in Optoelectronic Components • Initial model development – Integrated DFB laser and electro-absorptive modulator on an InP platform (1550nm)
• Assessment of Integration (Two Additional Cases)
– Monolithically Integrated Laser-Modulator
Figure removed for copyright reasons. Schematic of DFB laser with electro-absorptive modulator on InP platform. Source: Alcatel Optronics.
– Discrete Devices, Single Package – Discrete Packages
Massachusetts Institute of Technology Department of Materials Science & Engineering
From: E Fuchs, E Bruce, R Ram, & R Kirchain “Process Based Cost Modeling of Photonics Manufacture: The Cost-Competitiveness of Monolithic Integration of a 1550nm DFB Laser and An ElectroAbsorptive Modulator on an InP Platform” in press Journal of Lightwave Technology 3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 17
The MIT/CTR Optoelectronics Fabrication Model
• Mimics production from bare substrate through assembly, packaging, and final test
• Provides full flexibility in building a process flow • Captures effect of process derived yields at testing Currently 46 Process Modules Available
Growth/Deposition Surface Treatment Lithography Etch Process-based Cost Model Thermal Test Backend Assembly Backend Packaging Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 18
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Process Modules Building Blocks in Product Flow Clean
Bake
Alignment
Incoming Inspec Laser MQW LP-MOVPE .
n-InP Cladding (3x)
Epi Overgrowth
Test
Lidding, Lead check
Wire Bond Clean Bench Attach
PL Test
SiO2 Wet Etch
PECVD SiNx PL Test
Sleeve attach Wafer Cleaving
Lithography LP-MOVPE
Fiber w. Grin Lens Attach
Bench Assembly Package Assembly Test
(3x)
Test
Plasma Etch SiNx
Modulator MQW
Asher .
Auto. Inspec.
Laser on Carrier Chip Bond
Test
Temperature cycle
Vis. Inspec.
RIBE
Cure
Wirebond
Test
Burn-In
.
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 19
Cost Modeling Benefits to Roadmapping 1. Provides a generic platform to discuss the cost of process and product developments 2. Quantifies impact of future scale growth 3. Identifies key cost drivers 4. Quantifies necessary process performance hurdles
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 20
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Quantifying Cost-Sensitivity to Scale Models Derive Cost from Projected Optimal Fab Line (Monolithically Integrated Device)
$1,200 Unit Cost (USD)
$1,000 $800 $600 $400 $200
Material 24%
Other Fixed 26%
$0 0
10,000 20,000 30,000 40,000 50,000
Equipment 35%
Massachusetts Institute of Technology Department of Materials Science & Engineering
Other Variable 15%
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 21
Cost Modeling Benefits to Roadmapping 1. Provides a generic platform to discuss the cost of process and product developments 2. Quantifies impact of future scale growth 3. Identifies cost drivers 4. Quantifies necessary process performance hurdles
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 22
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Identifying Key Cost Drivers Models Provide Unequaled Resolution (Monolithically Integrated Laser-Modulator) $100
Other Fixed Equipment Other Var Materials
Unit Cost (USD)
$80
$60
$40
$20
(APV 30,000)
A
A
lig n
ss m en em t bl y Fr T on es t-t t oBa C c k hi p B on Fi be d B r en ch Att a ch A ss Sp em in b -O ly n Re s Vi su ist a B en l Te st ch A tta ch W ire bo nd
$0
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 23
Identifying Opportunities for Improvement: Unit Cost Elasticity to Yield (Monolithically Integrated Device)
• Yield is key issue for
most leverage? – Position in flow
– Embedded yield
• Cost elasticity to yield % Δ Cost % Δ Yield – Identifies process yield impact on aggregate cost Massachusetts Institute of Technology Department of Materials Science & Engineering
0.6 0.5 0.4 0.3 0.2 0.1 0 Lid din Ali g gn me nt Bu rn - In Ch ip Bo n d Wi reb on d PE CV Me D tal Lif tof f La pp ing Ebe am MO CV D
• What processes provide the
0.7
Cost Elasticity to Yield
optoelectronics manufacturing cost
0.8
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 24
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Cost Modeling Benefits to Roadmapping 1. Provides a generic platform to discuss the cost of process and product developments 2. Quantifies impact of future scale growth 3. Identifies cost drivers 4. Quantifies necessary process performance hurdles
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain
Massachusetts Institute of Technology Department of Materials Science & Engineering
Engineering Economic Analysis: Slide 25
Cost Sensitivity to Final Test Yield (Monolithically Integrated Laser-Modulator)
0.8 0.7
$500-$750
0.6 0.5
$750-$1000
0.4
Massachusetts Institute of Technology Department of Materials Science & Engineering
0.3
50000
40000
30000
20000
10000
6000
2000
$1000-$1250
Final Test Yield
0.9 $250-$500
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 26
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Case Two: Investigating Early Stage Developments in Optoelectronic Components • Initial model development is around a well-known case
– Integrated DFB laser and electro-absorptive modulator on an InP platform (1550nm)
• Assessment of Integration (Two Additional Cases)
– Monolithically Integrated Laser-Modulator – Discrete Devices, Single Package
Figure removed for copyright reasons. Schematic of DFB laser with electro-absorptive modulator on InP platform. Source: Alcatel Optronics.
From: E Fuchs, E Bruce, R Ram, & R Kirchain “Process Based Cost Modeling of Photonics Manufacture: The Cost-Competitiveness of Monolithic Integration of a 1550nm DFB Laser and An ElectroAbsorptive Modulator on an InP Platform” in press Journal of Lightwave Technology
– Discrete Packages
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain
Massachusetts Institute of Technology Department of Materials Science & Engineering
Engineering Economic Analysis: Slide 27
Exploring the Cost-Impact of Integration: Models Allow Testing of Novel Technologies $2,500 Monolithically Integrated
Unit Cost (USD)
$2,000
Discrete Device, Single Package
Discrete Package
$1,500
$1,000
$500
$0 0
10,000
20,000
30,000
40,000
50,000
The most competitive alternative is the monolithically integrated laser-modulator. Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 28
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Process-based Cost Modeling (PBCM) • Objective – Map From Process Description To Operation Cost
• Purpose – Inform Decisions Concerning Technology Alternatives BEFORE Operations Are In Place Product Description Part Geometry Material Properties
PBCM
Economic Characteristics
Production Cost
Operating Conditions 3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain
Massachusetts Institute of Technology Department of Materials Science & Engineering
Engineering Economic Analysis: Slide 29
Process-based Cost Modeling (PBCM) • PBCM forecasts manufacturing requirements Æ costs – Processing requirements • Cycle times, equipment specifications – Resource requirements • Number of tools, equipment, and laborers
Operating Conditions Massachusetts Institute of Technology Department of Materials Science & Engineering
Financial Model
Production Cost
Operations Model
Resource Requirements
Process Model
Processing Requirements
Product Description
• How do technology changes impact manufacturing cost?
Factor Prices 3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 30
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Creating a PBCM: Overview • Models are created by decomposing problem from cost backwards – Determine what characteristics, I1, effect cost – Determine what characteristics, I2, effect I1 ... and so on until... – Determine how process description effects In
Intermediate ... Process Characteristics Description In
Intermediate Operation Characteristics Cost I1
Model works from inputs to costs Modeler works from costs to inputs Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 31
Creating a PBCM: Critical Steps • Define Question To Be Answered • Identify Relevant Cost Elements • Diagram Process Operations & Material Flows • Relate Cost To What Is Known • Understand Uncertain Characteristics
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 32
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Step One: Define Question What is cost?
Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 33
Creating a PBCM: Step One • Define Question To Be Answered – Cost of What? • Carefully Understand Processing Boundaries – Cost to Whom? • Perspective Determines Pertinent Costs – Cost Varying How? • What Technical Changes Are Being Considered? – Cost Compared to What? • Relative to Other Options • Absolute Measure of Operation
• More Than Any Physical Measure Cost Is Context Dependent – Cost estimation requires exhaustive definition of context Massachusetts Institute of Technology Department of Materials Science & Engineering
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 34
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Examining Automobile Recycling: Applying Process-based Cost Modeling • Models account for:
• Examined questions of:
– Vehicle composition and configuration
– Changing vehicle composition
– Factor costs and transfer prices
– Alternative recovery technologies
– Recycling practice
– Imposed recovery targets ASR
Hulk
$ Massachusetts Institute of Technology Department of Materials Science & Engineering
Steel Scrap
$
Zinc
Heavy Blend Aluminum
Parts Large Castings Battery Catalytic Converter
Loss
ASR Nonferrous Separator
Shredder
Dismantler Old Car
$
$
Red Metals
$
$
Processing Gain
3.080 Econ & Enviro Issues In Materials Selection Randolph Kirchain Engineering Economic Analysis: Slide 35
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