What Is to Be Learned?

This chapter covers the following topics:

Important aspects of costing Aircraft and operational costs A rapid-cost method for manufacture (see [1]) DOC details and computation methods

16.1.1 Coursework Content

Readers are to estimate the Bizjet DOC. All relevant information to estimate the aircraft’s DOC is provided. However, the estimation of aircraft costs can be omitted if it has been covered in another course by specialists. In this book, cost studies do not alter the finalized and substantiated configuration obtained thus far through the worked-out examples. It is beneficial to be aware of the cost implications in aircraft design and operation.

16.2 Introduction

Typically, at the conceptual design phase of a new aircraft program, insufficient information about design details is available to estimate costs. In-house previous experience on cost becomes crucial in the trade-off studies of cost versus per­formance of various design parameters. A preliminary and fast but realistic cost­estimating methodology (e. g., an accuracy of less than ±15%, set at a high-level data structure) (Figure 16.1) is needed to help designers investigate and adopt new proven technologies in order to advance a product to a competitive edge.

The post-conceptual design study phase leads to the project-definition phase, followed by the detailed-design phase when manufacturing activities produce a fin­ished aircraft. At later stages of a project, when more accurate cost data are avail­able, the use of an analytical cost method at a lower level of data structure fine – tunes the cost estimates obtained in the earlier conceptual stages. Figure 16.1 shows the levels of cost-model architecture to serve various groups at different stages of the program milestones. The deeper the breakdown of a parametric method, the more it converges to an analytical method. The proposed rapid-cost model based on parametric method is quite different from the analytical-cost method. The latter
procedure is time-consuming and may omit some of the myriad details involved. The parametric method is generally intended for designers, whereas the analytical method is intended for corporate use to establish aircraft pricing and gain a bet­ter understanding of a customer’s cost goals, constraints, and competitive market requirements; it also is useful at the bidding stage and for other budgetary purposes. The state of the art of cost modeling predictions is close to the actual cost after production has been stabilized.

Less accurate cost considerations at the conceptual design stage, specifically intended for designers, are no less meaningful than what accountants and estimators provide to management for assessing profitability and running a lean organization. Extending the frontiers of cost-saving through IPPD rather than merely running lean on manpower adds a new dimension to harnessing human resources by orga­nizations investing in people, which is where it counts. In fact, the preliminary cost estimates at higher levels of architecture flow to the lower level when more data are generated as a project advances through the milestones. Cost estimations made by different methods should converge within close tolerance, benefiting from in­house experience. Other cost-estimation models are not pertinent to the scope of this book.

The success or failure of cost estimation using a parametric method depends on identifying correct cost drivers and then establishing a good cost relationship with available in-house data to embed accuracy. Ensuring quality while making the product converge on cost (i. e., design for cost) rather than allowing cost to make the product (i. e., design to cost) is the essence of cost control. The core of cost modeling is to identify and define the cost drivers and functions of a product and to generate information, which are tools for DFM/A (see Chapter 17) in an IPPD environment. The DFM/A studies lead to design to cost and are part of the Six Sigma concept (see Chapter 17) to make a product right the first time, which reduces costs. Based on an awareness of the customer’s affordability and requirements, the designing and manufacturing target costs are established.

The industry needs to recover its investment with the sale of approximately 400 aircraft, preferably fewer. About 4 to 6% of the aircraft selling price is intended to recover the project cost (i. e., RDDMC), known as amortization of the investment made. For this reason, offering aircraft in a family concept covers a wider market at a considerably lower investment when the cost of amortization is closer to 2 to 4%. Smaller aircraft break even at approximately 200 sales. In current practice, civil aircraft manufacturers sell preproduction aircraft used for flight testing to recover costs. Military aircraft manufacturers incorporate new, unproven technologies and invest in technology-demonstrator aircraft (on a reduced scale) to prove the concept and subsequently substantiate the design by flight-testing on preproduction aircraft, some which could be retained for future testing.

The general definition of an aircraft price includes amortization of the RDDMC but not spare parts and support costs:

aircraft price = aircraft manufacturing cost + profit = aircraft acquisition cost

In this book, the aircraft price and cost are synonymous; the aircraft price is also known as the aircraft acquisition cost. The profit margin is a variable quantity and depends on what the market can bear. This book does not address the aircraft

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pricing method. In general, the profit from a new aircraft sale is rather low. Most of the profits are from sales of spare parts and maintenance support. Operators depend on the manufacturer as long as an aircraft is in operation – that is, two to three decades. Manufacturers are in a healthy financial position for several decades if their products sell in large numbers.

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