Analysis of cost estimating processes used within a concurrent engineering environment throughout a product life cycle Christopher Rush, Dr. Rajkumar Roy, Department of Enterprise Integration, SIMS, Cranfield University, Cranfield, Bedford, MK43 OAL, United Kingdom. Tel: 44 (0) 1254 765261. Email: c.rush@cranfield.ac.uk Tel: 44 (0) 1234 754073. Email: r.roy@cranfield.ac.uk Abstract Concurrent engineering environments affect the cost estimating and engineering capability of an organisation. Cost estimating tools become outdated and need changing in order to reflect the new environment. This is essential, since cost estimating is the start of the cost management process and influences the ‘go’, ‘no go’ decisions concerning a new product development. This paper examines both traditional and more recent developments in order to highlight their advantages and limitations. The analysis includes parametric estimating, feature based costing, artificial intelligence, and cost management techniques. This study was deemed necessary because recent investigations carried out by Cranfield University highlighted that many concurrent engineering companies are not making efficient, wide spread use of existing estimating and cost management tools. In order to promote more efficient use of the discussed estimating processes within the twenty first century, this paper highlights the work of a leading European aerospace manufacturer and their efforts to develop a more seamless estimating environment. Furthermore, a matrix is developed that illustrates particular concurrent engineering environments to which each technique is aptly suited. 1. Introduction Cost is perhaps the most influential factor in the outcome of a product or service within many of today’s industries. More often than not, reducing cost is essential for survival. To compete and qualify, companies are increasingly required to improve their quality, flexibility, product variety, and novelty while consistently maintaining or reducing their costs. In short, customers expect higher quality at an ever-decreasing cost. Not surprisingly, cost reduction initiatives are essential within today’s highly competitive market place. Concurrent engineering is one such initiative. Since cost has become such an important factor of success, project development needs to be carefully considered and planned. Recent research demonstrates that companies unable to provide detailed, meaningful cost estimates, at the early development phases, have a significant higher percentage of programs behind schedule with higher development costs, than those that can provide completed cost estimates [1]. Therefore, it is essential that the cost of a new project development be understood before it actually begins. It could mean the difference between success and failure. This article is divided into three broad sections. The first highlights the increasing need for effective cost estimating and cost management techniques within a concurrent engineering environment. Cost estimating being defined as the process of predicting the cost/outcome of an as yet undefined project, and cost management being defined as a technique for managing the development processes in order to achieve the estimate. The second section of the paper discusses several available estimating and cost management techniques, in order to provide a broad overview and to better understand where and when to use them within a project life cycle. Furthermore, it promotes awareness concerning the traditional and more state of the art techniques that have emerged over the last decade. The final section presents a snapshot view of several leading concurrent engineering companies, which demonstrates how estimating and cost management techniques are being utilised within industry. This study highlights a general lack of structure and order concerning the use of current estimating techniques within concurrent engineering environments. In an attempt to counter this problem a matrix is developed to assist the choice of applying an estimating technique at different stages of a product lifecycle. 2. The need for cost estimating/engineering Cost estimating helps companies with decision- making, cost management, and budgeting with respect to product development. It is a methodology used for predicting/forecasting the cost of a work activity or output