Mattingly "AI & Prompt Design: The Basics of Prompt Design"
Cost reduction and life cycle analysis
1. Cost reduction
• An organized and planned one-time or
continuous initiative taken with the goal to
reduce business costs from a current level to a
desired lower level.
• Cost reduction may be targeted to one specific
cost (account), a selection of costs (accounts) or
organization-wide.
2. Cost control
• An ordered and intentional effort to limit the
growth of costs within specific accounts.
• The management practice of putting lock
limits on accounts.
4. Life Cycle Cost (LCC)
• Life cycle costing, LCC, is the process of economic
analysis to asses the total cost of ownership of a
product, including its cost of installation, operation,
maintenance, conversion, and/or decommission.
5. Life Cycle Cost (LCC)
• By using LCC, total cost of the product
can be calculated over the total span of
product life cycle.
6. Life Cycle Cost (LCC)
• LCC is a economic tool which combines
both engineering art and science to make
logical business decision.
• This analysis provides important inputs in
the decision making process in the
product design, development and use.
7. LCC for product supplier
• By using LCC, product suppliers can
optimize their design by evaluation of
alternatives and by performing trade-off
studies.
• By using LCC, product suppliers can
evaluate various operating and
maintenance cost strategies (to assist
product users).
8. LCC for customer
• By using LCC, customers can evaluate and
compare alternative products.
• By using LCC, customers can assess
economic viability of projects or
products.
9. Why use LCC?
Typical conflict in most of the company:
• Project Engineering wants to minimize capital costs
as the only criteria,
• Maintenance Engineering wants to minimize repair
hours as the only criteria,
• Production wants to maximize operation hours as
the only criteria,
• Reliability Engineering wants to nullify failures as the
only criteria,
• Accounting wants to maximize project net present
value as the only criteria,
• Shareholders want to increase stockholder wealth as
the only criteria.
10. Why use LCC?
• LCC can be used as a management
decision tool for synchronizing the
divisional conflicts by focusing on facts,
money, and time.
11. Why use LCC?
• Why should engineers be concerned
about cost elements?
It is important for engineers to think like
managers and act like engineers for a profit
maximizing organization.
Money Does Matter!!!
12. Cost element
• For an equipment, there are TWO cost
elements:
1) Initial Cost, and
2) Operation & Maintenance Cost
• The identification of cost elements and their sub-
division are based on the purpose and scope of the
LCC study.
13. Cost element
• Initial Cost:
–Design & development cost,
–Investment on asset, or cost of equipment,
–Installation cost or erection & commission
cost.
14. Cost element
• Operation & Maintenance Cost:
–Labour cost,
–Energy cost,
–Spare & maintenance cost,
–Raw material cost.
18. Implementing Kaizen- few rules
• List your own Problems
• Grade problems as to minor, difficult and major
• Start with the smallest minor problem
• Move on to next graded problem and so on
• Remember improvement is part of daily routine
• Never accept status quo
• Never reject any idea before trying
• Eliminate tried but failed experiments
• Highlight problems rather than hiding
19. Kaizen Philosophy
Approach to Traditional Organization Kaizen Environment
Attitude
Employees
Information
Interpersonal Relationship
Managerial Belief
Management Culture
Management Function
Management Stress
Let it go
Cost
Restricted
Commercial
Routine
Bureaucratic
Control
Functional
Continuous Improvement
Assets
Shared
Human
Change
Participative
Supportive
Cross functional
20. Procedure For Implementation
• Form small groups from 6-10 persons
• Give them numbers-Kaizen 1,Kaizen-2…
• Appoint an evaluator of the group
• Arrange weekly meetings of group (6-12 months)
• Submit progress of improvement in writing
• Allow each member to express
• No disturbance when others are speaking
• However Clarifications can be sought instantly
21. Evaluation
• 0 Marks for no improvement made
• 0 to 30 Marks depends upon improvement tried but
failed
• 30 to 50 Marks for small to moderate improvement
• 50 to 75 Marks for good improvement
• > 75 Marks for extraordinary improvement
22. Evaluation Other factors
• A – Attitude
• S – Safety
• P- Productivity
• E - Energy Saving
• M - Money Saving
23. Benefits of Kaizen
Reduction in Production Time
Reduction in Rejection
Energy Saving
Improved Quality
Tangible Benefits
Motivation
Team Building
Sense of belongingness
Environment Conservation
Change in attitude
Intangible Benefits
24. Reasons for Failure of KAIZEN
• Lack of interest and support from management
• Lack of training of :
– Listening skills, Presentation Skill, Communication Skill
• Criticism of failure from fellow members
• Ignoring Basic Concept ( Improvement is part of daily routine)
• Work Pressure –sidelining the Kaizen
25. PIT FALLS IN KAIZEN
• Resistance to change
• Lack of proper procedure to
implement
• Too much suggestion may
lead to confusion and time
wastage
26. Kaizen Costing
• Cost Reduction in
– Design of the Product
– Development of the Product
– Production Of the Product
27. Kaizen Costing-definition
Kaizen costing is the maintenance of present
levels for products Currently being manufactured
via systematic efforts to achieve the desired cost
level.
KC is applied to product that is already
under Production
Time prior to KC is Target Costing
28. • Kaizen Costing Calls…..
Establishment of cost reduction target amount and its
accomplishment through Kaizen activities---continuous
improvement.
30. What is Benchmarking
• Benchmarking is an improvement process that is
used to identify best practice within a peer group
and facilitate it’s incorporation into your organization
31. Continuous
Ongoing
Long-term
Benchmarking is a
Organizational comparison
Organizational improvement
Meeting or surpassing industry best practices
Developing product/process objectives
Establishing priorities, targets, goals
Systematic
Structured
Formal
Analytical
Organized
Organizations
Companies
Institutions
Process
Evaluating
Understanding
Assessing
Measuring
Comparing
Recognized
Acknowledged
Identified
Best-in-class
World-class
Representing
best practices
For
the that
are
as
for the
purpose of
32. General Principles for Involvement
• The more people involved, the more different views
and perspectives brought to bear.
• The more ideas generated, the better the chance of
making significant changes.
• The more people in the benchmarking process, the
less difficult it is to sell the concept and any results to
the workforce.
33. Types of Benchmarking
• Internal benchmarking
• Competitive benchmarking
• Industry or Functional benchmarking
• Process or Generic benchmarking
34. Internal Benchmarking
• Similar activities in different locations,
departments etc
Advantages:
– “Sharing” - Communication
– Data easy to get
– Good results, immediate benefit
– Good practice
Disadvantages:
– Limited focus
– Internal bias
– “Miss the boat”
35. Competitive Benchmarking
• Direct Competitors, same customer base
Advantages:
– Directly relevant
– Comparable practices & technologies
– History of information
Disadvantages
– Data collection difficulties
– Ethical issues
– rivalry
36. Industry or Functional Benchmarking
• Leaders in Similar Industry
Advantages
• – Willing partners
• – Readily Transferable
Disadvantages
– Cost
– Some “willing partners” not so willing!
37. Process or Generic Benchmarking
• State of the art Processes/products/services
• Break the company into generic functions
Advantages
– Breakthrough ideas
– Network development
– High potential for innovation
Disadvantages:
– Hard to do!
– Transferring practices (learning!)
– Some information not transferable
– Time consuming
38. Benchmarking: Is/Is Not
IS IS Not
• Continuous process
• Provides valuable information
• Learning
• Time-consuming
• Viable tool, generically applicable
• One-time event
• Provides simple answers
• Copying, imitating
• Quick & easy
• A buzzword, or fad
39. Organizations who consider it vital
to their survival and growth
• AT&T
• American Cancer Society
• American Express
• Anderson Consulting
• Cisco
• Dow Chemical
• Ernst and Young
• General Motors
• Harley Davidson
• Intel
• Johnson & Johnson
• Kellogg
40. Benefits of Benchmarking
• Benchmarking helps identify the gaps between the
organization that is undertaking the benchmarking
assessment and best practice.
• Undertaking benchmarking can lead to improvements
being incorporated into processes and systems
delivering gains in efficiency and effectiveness
• Benchmarking can help align improvement activity with
strategic goals and objectives
41. The Benchmarking process
• Benchmarking has a defined process
1. Identify the process that will be benchmarked – consider what
metrics will be measured
2. Measure results in own organization
3. Identify a benchmarking partner (look for one with favourable
results or to the metric being measured or known best practice)
4. Measure the process
5. Analyze the conditions that determine the favourable results
6. Determine an action plan to take your organization to the favourable
results
7. Review Benchmarking results and conduct regular reviews with your
peer(s).
42. Problems with Benchmarking
• Problems with benchmarking occur where
– Data is not obtained for the process being measured – and
analysis becomes subjective
– No peer group/best practice identified (including data
available)
– The gap between current state and best practice is
captured but nothing is done about it
– Assumed best practice isn't best practice
– Benchmarking happens as a one off event and not
reviewed periodically
43. What is BPR?
• Reengineering is the fundamental rethinking and
redesign of business processes to achieve dramatic
improvements in critical, contemporary measures of
performance, such as cost, quality, service and speed.
(Hammer & Champy, 1993)
46. Why Organizations Don’t Reengineer?
• self-righteousness
• Political Resistance(conflict)
• New Developments
• Fear of Unknown and Failure
47. Management Control Systems
A management control system is a means of gathering and using information.
It guides the behavior of managers and employees.
48. 48
Basic Concepts
Elements of a control system consists of:
1. A detector
2. An assessor
3. An effector
4. A communication network
49. 49
1. A detector or sensor is a device that measure
what is actually happening in the process being
controlled.
2. An assessor is a device that determines the
significance of what is actually happening by
comparing it with some standards or expectations
of what should happen.
3. An effector (feedback) is a device that alters
behavior if the assessor indicates the need to do
so.
4. A communications network consist of devices
that transmit information between the detector
and the assessor and between the assessor and
the effector.
50. 50
Example: You are driving a car
• Detectors= Your eyes
• Assessor= Your brain
• Effector= Your foot
• Communication network= Your nerves
system
51. 51
• Your eyes (detectors) measure actual speed by observing the
speedometer.
• Your brain (assessor) compares actual speed with desired speed
(standard: the highest speed is 80 km/hour) to detect a
deviation from standard.
• Your brain (assessor) directs your foot (effector) to ease up the
accelerator if actual speed (90 km/hour) is faster than the
standard speed (80 km/hour), press down the accelerator if the
actual speed (70 km/hour) is slower than standard speed (80
km/hour).
• And, your nerves (communication network) form the
communication system that transmits information from eyes
(detectors) to brain (assessor) and brain (assessor) to foot
(effectors).
55. Benefits of Decentralization
Creates greater responsiveness to local needs
Leads to gains from quicker decision making
Increases motivation of subunit managers
Assists management development and learning
Sharpens the focus of subunit managers
56. Decentralization in
Multinational Companies
Decentralization enables country managers to
make decisions that exploit their knowledge
of local business and political conditions.
Multinational corporations often rotate
managers between foreign locations
and corporate headquarters.