Who is involved?
Galorath Incorporated grew out of a consulting practice focused on product cost estimation, control, and reduction that began in the late 1970s. Over the last 30 years, Galorath built their costing knowledge into the SEER suite of software products.
Dassualt Systems is one of the "big 3" Product Lifecycle Management (PLM) companies in the world.
Hiller Associates spoke with Galorath CEO Dan Galorath, Vice President of Sales & Marketing Brian Glauser, and SEER for Manufacturing product lead Dr. Chris Rush and got a full product demo.
What does this integration do?
The integration allows users of CATIA to use SEER's costing software for composite materials within the CATIA environment. In CATIA, the engineer designs a lay-up for a composite part, generating a Ply Table (a critical design artifact for composite parts that specifies material, geometry, and some manufacturing info). That activates the integrated SEER Ply Cost Estimator so that the designer (or the cost engineer or purchasing person aiding him) can set up more part-specific costing choices and preferences within the CATIA environment.
When ready, the user pushes the cost analysis button. The information is processed by SEER Ply Cost Estimator which sends the ply table data and other information to the interfacing SEER-MFG software to compute cost. The cost data is returned and presented to the user, once again within a native CATIA screen.
Currently, the integration of SEER is applicable for parts made of composite materials. It's a strong starting point for the integration partnership because SEER has a long experience in the field of costing composites, working with companies in the defense and aerospace verticals. Composites are also becoming more mainstream in other industries, such as automotive and consumer products. Galorath has been a major player in the US Government's Composites Affordability Initiative (CAI), a 50/50 government/industry funded consortium including Boeing, Lockheed and Northrop Grumman that was formed to drive down the costs of composites. Galorath has also worked with Airbus in the area of composites parts costing.
Galorath's Brian Glauser says that the SEER Ply Cost Estimator has hundreds of man-years invested, much from previous work with CAI and with aerospace companies that resulted in several of the modules already in the SEER-MFG standalone product.
The first version of the SEER Ply Cost Estimator handles many composites manufacturing processes, materials, concepts of complexity, and both variable and tooling costs. However, it does not yet directly cost the assembly of one part to another.
The initial integration will be to CATIA v5, but SEER and CATIA have signed a v6 agreement as well. That integration will follow later.
Galorath (and likely Dassault) are hoping that the SEER Ply Cost Estimator will be well received by customers and help drive many product cost benefits. If this happens, there may be demand from Dassualt's end customers not only to improve the SEER Ply Cost Estimator, but to expand the SEER/CATIA integration to other manufacturing processes covered in SEER's stand-alone software products such as machining, plastics, sheet metal and assembly processes.
What does it mean for Functional Level Groups?
Philippe Laufer, the CEO of CATIA was quoted saying :
"Using Galorath's SEER for Manufacturing in CATIA…will help companies perform early trade-off analysis on the use of various materials and composites processes before manufacturing even takes place."
Well, that has been one of the goals in Product Cost Management for a long time. If your company uses composites, the tool has the following possibilities:
- Engineering – identify which design choices are driving cost and by how much
- Purchasing/Manufacturing – get an early warning of what to expect from suppliers before asking for quotes or estimates (should-cost)
- Cost Engineering –focal point for the cross-functional discussion about cost to drive participation, especially from engineering
It's important to realize that this integration will have its limitations, as with any costing product. First, the current integration applies only to composites. While expensive, composites are only one type of part on the Bill of Material (BOM). You will have to go beyond the current integration of SEER/CATIA to cost the full BOM, perhaps to SEER's standalone costing product or to those of its competitors.
Second, remember that cost is far harder to "accurately" estimate than many physical performance characteristics. While meeting an absolute cost target is important, even more important are the following:
- Continuous Design Cost Improvement – If your company consistently designs lower cost products because you have superior cost estimation information, you WILL beat your competitors.
- Correct Cost and Margin Negotiation – If your company is better at negotiating quotes because it can give suppliers a better understanding of what it will cost them to make your part and you can negotiate a margin that is not too high, but adequate to keep your suppliers healthy, you WILL beat your competitors1.
What does it mean for the C-Level?
Philippe Laufer of CATIA also says:
"This [the SEER Composites integration] leads to finding out the most efficient way of manufacturing a product while meeting cost, performance, functionality, and appearance requirements."
The C-suite doesn't really care about composites or ply tables in and of themselves, but it does care about revenue and profit. Of course every well-marketed product will claim to improve these metrics. Regarding product cost, the good news is that Galorath and Dassault are aiming at a big target. Companies that use a lot of composites can have very high costs. For example, Boeing and Airbus have Cost of Goods Sold of 84.6% and 85.5% and Earnings before Tax of 7.2 and 3.6%, respectively2. Those COGS figures are big targets on top of a highly leveraged COGS/Profit ratio.
What does it mean for Product Cost Management becoming mainstream in the enterprise software stack?
We asked Dan Galorath how long it would be before Product Cost Management was as much of the PLM ecosystem as finite element, manufacturing simulation, or environmental compliance. He replied:
"Cost estimation software will never be on every designer's workstation, but I don't believe that is what it means for Product Cost Management to be considered 'mainstream.' It's not fully mainstream yet, but a greater need is being driven by outsourcing and the tight business environment. The procurement folks can't only rely on internal manufacturing knowledge like they used to. They need tools like SEER to fill the gap and move the cost knowledge base forward."
We agree with Mr. Galorath. This is another step, another piton to secure Product Cost Management onto the PLM cliff, as PCM continues to climb this steep hill.
This is the first integration point between independent Product Cost Management software companies and the PLM/ERP world since September 2012, when Siemens PLM purchased Tsetinis Perfect Costing3. PTC has built some level of cost tracking ability into Windchill, and Solidworks (owned by Dassault) has developed the first couple versions of a costing calculation module for their product.
There is still a lot of ground to cover. There are quite a few independent product cost management software tools that have costing intellectual property that can accelerate the process, especially if the big PLM companies acquire them or partner with them. When that will happen is anybody's guess, but for now it looks like CATIA users, at least, have a viable solution for composites costing… and maybe more in the future.
1 For more information, see the Hiller Associates Industry Week Article: Your Should-cost Number is Wrong, But It Doesn't Matter, http://www.industryweek.com/procurement/your-should-cost-number-wrong-it-doesnt-matter
2 Per www.morningstar.com, trailing 12 months COGS, 3/13/2014
3 Siemens buys Perfect Costing Solutions (Tsetinis), Hiller Associates, September 2012