Modern Cost Engineering E-Book

Frank Weinert

• Herausgeber: BoD - Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 153

Veröffentlichungsjahr: 2025

Beschreibung

How costdata developed a method for controlled profit maximisation and implemented it as a controlling instrument in companies.

Das E-Book Modern Cost Engineering wird angeboten von BoD - Books on Demand und wurde mit folgenden Begriffen kategorisiert:
cost engineering, Profit Optimization, Benchmark Data, Cost Data, Product Cost Estimation

Leseprobe

Contents

Foreword

How it all began

The fundamentals of cost engineering.

The interplay of functionality and economic efficiency

The maximum leverage effect and the marrying of development and costs

Integrated cost considerations in product development

Purchasing vs Finance

Quality has its price.

The debate about fair profit margins

Key strategies for reducing costs

A fair approach leads to success.

Calculating costs – correctly

The role of the cost engineer.

The dangers of incorrect

or non-existent calculations

Machine capacity utilisation and full cost accounting

The tools in cost engineering

Target costing

Important market data for successful cost engineering

Errors in target costing.

Design-to-cost.

Overengineering and incorrect structures

Planning, implementing and finalising cost engineering projects

Cost workshops

Cost and value analysis

Negotiation techniques

The means for successful cost engineering

Key figures.

Strategies

Organisational structure

costdata tools

Consulting, data and software from costdata

The costdata® calculation software

CO2 calculator

costdata® estimation

Afterword

Note: For reasons of better readability, the following chapters do not use the masculine, feminine and diverse (m/f/d) forms simultaneously. This is no way implies any form of discrimination. The content is intended to address all people equally.

About the author

Frank Weinert, a graduate engineer, has more than 35 years' experience in cost engineering, purchasing, production and controlling in virtually all sectors of the manufacturing industry.

He studied production engineering in Cologne and began his career as a trainee at Ford-Werke AG, where he was responsible for purchasing a wide range of product groups. He worked for Autoeuropa, the then joint venture between VW and Ford, in Portugal from 1994 to 1996. As Senior Buyer, he sourced the first navigation systems from a supplier and helped produce the Escort convertible. In his final years at Ford, he worked extensively on product cost analysis, leading to significant price reductions.

After 10 years at Ford, he became self-employed and founded costdata GmbH. The company went on to develop the standard software, costdata® calculation, and other software programmes for cost engineering, purchasing, controlling, development and production. The costdata® market data is the world's largest cost database and contains the latest prices for all product cost estimates and competitiveness analyses.

Frank Weinert has been responsible for over 600 cost reduction and calculation projects, as well as setting up and developing cost engineering departments. He developed a method for controlled profit maximisation which costdata GmbH implements as a controlling instrument in companies.

He is a guest lecturer at the Koblenz University of Applied Sciences and heads the Institute for Cost Engineering, which aims to raise awareness of cost engineering principles and thereby improve the efficiency of all manufacturing industries.

Foreword

Dear reader,

Are you a managing director of a medium-sized or large company who would like to maximise profits? Do you want to save or avoid costs in your day-to-day business and gain detailed visibility of your total costs?

Are you keeping up with the technological progress of the digital age but struggling with the fact that...

Your employees don’t have the necessary expertise in cost engineering;

You still do not have a controlling tool at your disposal to monitor your competitiveness in a simple and permanent way;

You still haven’t implemented the Target Costing and Design to Cost methods across the board;

Bureaucratic organisational processes are hampering their efficient implementation;

Regulations are impeding the integration of digitalisation and new technologies; and

Economic globalisation threatens the domestic economy.

I have gained a deep understanding of the dynamics of market data during my many years of managing costdata. I have developed the world's largest cost database with growth and constant market changes in mind. We are currently the leading provider of market/benchmark data, delivering precise data for accurate calculations and analyses. Continuous research into market prices allows us to realise average cost savings of 12% for our customers, including the automotive industry.

This book will provide you with comprehensive information on the subject of controlling and optimising your competitiveness through modern cost engineering. You will learn everything you need to know to achieve detailed cost transparency throughout the entire life cycle of your products, including purchased parts. You will also come away with options for effectively controlling all of your cost components in a sustainable manner. You will also learn how to plan, implement and successfully conclude cost engineering projects and how to deploy the right negotiation techniques to strategically position yourself with your end customer or supplier.

At the end of this book, you will have specific cost engineering key figures at your disposal that you can immediately integrate and implement in your strategy development. I will also provide you with insights into organisational structure and management that will help you achieve sustainable economic results, including optimising operating costs, increasing efficiency and maximising your return on investment. You will also benefit from a number of simple and cost-effective methods to help you continually review and optimise your competitive position.

I hope you enjoy reading this book and that the insights it provides will help you to make your company fit for the future and increase its economic success. May you be inspired and enriched as you navigate your way through its pages and come away equipped with the tools you need to master the challenges of modern cost engineering.

However, it is up to you to turn this information into measurable success. If you would like us to help you, please get in touch. We are here for you! I wish you all the best on this exciting journey!

How it all began

My parents and my brother were born in Berlin. After my brother was born, my parents took a small detour to Düsseldorf before moving to the city of Cologne, where the River Rhine is at its most beautiful. I was born there, and Cologne has remained my home to this day and, of course, also the main location of my company, costdata.

My first steps in the automotive industry

My professional career began in 1980 with an apprenticeship as a machine fitter at one of the most innovative companies at the time: Ford-Werke AG. It was the first time I had been involved with the automotive industry in a professional capacity. Since my early childhood I have been fascinated by cars. I used to spend countless hours lying on the floor building Lego vehicles. Cars were the biggest thing in my life. In addition to the rural surroundings of Cologne and my love of going on outdoor adventures with my friends, I developed a keen interest in technology at an early age, especially cars and motorbikes. At school I was passionate about technical drawing, mechanical engineering and materials science, and these were the first signs of what the future had in store for me.

With my certificate as a skilled worker, I was able to work at Ford during the summer holidays. I earned good money, getting a decent hourly wage and sometimes even being paid by the piece. Work began early in the morning. At the end of a day's work, my hands would be black, covered with oil and dirt. Although I enjoyed getting to know all the machines and acquiring skills such as turning, milling and drilling, I knew that I wanted more.

That is why, immediately after completing my apprenticeship, I decided to go to university to get an engineering degree in the field of production technology, precisely because it dealt with:

How can a product be optimally produced? Which machines are available for which processes?

During this time, I stumbled upon another passion: sales. I was enormously ambitious at both school and university – especially when it came to achieving financial success and building wealth.

Although I was still wet behind the ears, I developed a keen interest for business at an early age. I gave myself what I wanted early on by believing that anyone who has achieved something will want to, and is allowed to, show it to the world. Even before my time at university, I started working as an insurance agent to finance this life of luxury. I had been approached by a friend who had also been recruited. My main task was to identify potential customers and offer them various insurance products, mainly accident insurance. Over time, I also started recruiting other people to sell for me. With this system, which you would no doubt refer to today as a “pyramid scheme”, the people I recruited became part of our sales chain.

Doing this while studying at the same time was both incredibly stressful and enjoyable. After about a year and a half of successful work, targets were in place. We were challenged to sell more, to make more money. This eventually led to a decision that would change my life.

At the age of just 20, I founded my first limited liability company with two friends.

I did my university studies in the mornings and my insurance agency work in the afternoons and evenings. I was either selling insurance or doing the work of a managing director. After graduation, I dedicated myself fully to the agency. At our peak, we were coordinating no fewer than 180 freelancers who were working for us. I even recruited young people at schools and offered them the opportunity to earn money on the side. It was a fantastic time.

In the end, it was my father - although proud of my early success – who convinced me to make a change. A few months after I received my engineering degree, he asked me if I really wanted to sell insurance for the rest of my life. I realised that I risked losing my value in the engineering market if I did not start my career soon.

This was a turning point for me, and I had to make a difficult decision. For the first time in my life, I started filling out job applications with the intention of finally shaping my long-term future. I was close to securing a position in the sales department of a renowned food company, where I would have been trained to become a future sales director in Africa and France. Unfortunately, the third-generation owner of the company did not like the fact that I had not done my compulsory military service for health reasons, so he withdrew his offer.

It was as if the universe was sending me a sign, and my path led me back to the world of technology. Ford then made me an offer that would shape my future: I was offered a position in purchasing instead of my preferred field of sales.

Sometimes life takes us in a different direction than we would prefer, but it is often these unexpected twists and turns that allow us to grow the most.

Ford's offer was tempting: As a graduate trainee, I was given a clearly defined career path that would see me start as a Dispatcher, progress to become an Assistant Buyer and eventually become a Buyer. I realised that many of my skills were in demand here too. I would still be involved in negotiations and relationship building, just in a slightly different role. I decided to take advantage of the opportunity and learn something new.

Then I went abroad, to Portugal to be precise. I worked at Autoeuropa, a joint venture between VW and Ford. Here we could see the whole process from prototyping right through to series production. I was the one in the Purchasing Department responsible for the procurement of prototype parts at exactly the right time. In Portugal, my skills attracted the attention of the then plant manager: I very quickly managed to invite the managing director of a supplier who had long been unavailable. From that day on, I was his right-hand man and knew that I had made the right choice when I decided to prioritise furthering my career.

I acquired valuable knowledge about managing staff and leading teams and discovered the advantages and disadvantages of using an authoritarian management approach. After being in Portugal for a year and a half, I came back to Cologne and was faced with a very difficult situation:

I had a burning desire to develop within Ford. However, I realised that my internal interviews were not up to the required standard. Despite my international experience and tireless dedication, it was as if an invisible barrier was holding me back. My vision, the longed-for goal of my professional journey, was a seat on the board of directors. Inexplicable expectations seemed to overshadow my achievements. I was deeply disappointed when I found out that Ford was not going to keep the promise it had made to me. It was as if the rug had been pulled out from under my feet and all my ambitions thwarted.

When I returned from Portugal, my boss gave me new tasks. One of them was to analyse the costs of our suppliers.

The focus was on making the cost structure of the products more transparent. We did not just want to compare and negotiate quotes; we wanted to be able to understand the costs involved in making a product. This new and innovative approach helped us gain deeper insight into the cost structure and break any existing price agreements. Our aim was to achieve full cost transparency of the product costs and the supplier structure to allow us to understand the offer prices. My role was one of enormous responsibility: In order to assess whether suppliers' prices were justified, it was necessary to have detailed knowledge of production costs.

In the 1990s, Ford introduced this approach in Germany and I was proud to be part of that change. For a long time, we worked exclusively with rudimentary data. All we had were averages, for example for wages, from a few countries, and these were often more than three years old and therefore not accurate enough to calculate true costs. Nevertheless, we used this data to achieve a certain degree of cost transparency and to negotiate supplier price demands. Each process required its own calculation method, whether it was stamping, bending or injection moulding. However, as the years went by and I gained more experience, I began to develop ways of assessing whether the prices being charged by the suppliers were reasonable. There was a time when the price we paid for products was just a single value, without even a cost breakdown (CBD). The only thing we had was a price, and of course one of the things we did was calculate how much material was incorporated into the price. We initially performed this calculation using Excel spreadsheets. I noticed that we consistently required the same cost types, and each purchasing cost analyst had their own spreadsheet.

This gave me the idea that we should have software that was programmed in such a way that it could map all the production technologies and contain all the necessary up-to-date cost data.

Software that can calculate the cost of every part produced globally, regardless of the product and that always has an up-to-date cost database to draw on in the background. That was the initial spark for this idea.

I then took over a colleague's area in the purchasing department, as he had been reassigned to other duties. As we got to know each other, we realised that we were aiming to achieve the same. In the early days of our start-up, CPM (1997), we put our heads together at every opportunity to drive the design of the software. I did all the sales and thought about how we could contact the companies and get appointments and what or how we should present ourselves. One of my partner's relatives, who had just started studying to become an IT programmer, offered to program a first version of the software for us. Entering all the data into the software and keeping it up to date was a huge task. Since I had to work for Ford for at least ten years to qualify for the company pension, I decided to stay on for the last year and a half. We arranged for the approval of our side business and the incorporation of the company, presented our first draft of the software and asked if we could use it to negotiate with suppliers. We were able to achieve far greater price reductions than with the traditional method because we were negotiating based on figures, data and facts. If the calculation method and the numerical values were easy to understand and accepted by both parties, the calculation method would yield the product price. By the end of 1998, the time had finally come: Ten years at Ford were coming to an end, and I handed in my resignation. It seemed so inconceivable that anyone would want to leave, that I was asked to appear before the Board to explain why. The question on the board's mind was how on earth a buyer with the salary he was earning at Ford at the time could ever leave of his own accord. They expressed astonishment and told me in no uncertain terms that it was usually the company that decided to let them go. When we told them that we wanted to start our own business, they laughed at us and said it would never work.

Starting a business without a Ford salary and a safety net

We invested in the development of the software and presented our solution to potential customers. Our first orders did not take long to arrive. The main task was to visit our customers' suppliers to ensure clear cost transparency regarding the parts they purchased and to optimise product prices accordingly. Most of our initial contacts came from relationships with suppliers we had worked with at Ford. Our intention was clear: We wanted to launch our newly developed software. As in any field, the greatest resistance came from those companies that clung to their traditional ways and were sceptical of new ideas. They would ask why they needed our product when they already had processes that worked. But there were also those who saw the potential and supported us. They were ready to use our software and helped us to build up our company bit by bit. Before the implementation of the software, our task was to convince the suppliers of the significant savings that were possible. The more the suppliers were able to understand our calculations, the more successful we were in our negotiations.

From a one-customer company to expansion