(110a) Why Does It Cost So Much? Technical and Non-Technical Factors That Affect Early Stage Cost-of-Manufacturing Estimates of Developing Processes

John Anderson (jeanderson@dow.com)

and

Thomas Gilbert (tigilbert@dow.com)

Dow Chemical

Abstract

Estimates of the manufacturing cost of new products and processes at very early stages can be very useful when decisions are made to support or abandon projects.  If historical cost performance data from the estimator’s company or organization is available, it can be used as the basis of an extrapolation to predict the cost of a process being developed.  This process does require some ‘normalizing’ of the cost data so that a valid extrapolation is made.  Volume, process complexity, location and other factors should be considered and the impact of these variables will be reviewed.  In those cases where the production is to be executed at a third party, the extrapolation process also requires some insight about the outside firm’s technical capabilities and business practices.  For many reasons, prediction of cost and pricing at third parties, while very useful, is particularly challenging.  Qualitative observations made about the additional sources of variability observed in these situations and attempts made to quantify these will be discussed.