"Cost of ownership is one of the key factors in our decision matrix. Cost reductions and avoidances greater than $2 million for a single purchase have been documented. Similar cost savings are achievable for upgrades, process changes, and materials changes."
"Cost of ownership software tools help us to effectively manage our multi-billion dollar capital asset portfolio."
These are just a few of the public comments that have been made by Fortune 500 firms regarding the value that cost of ownership (COO) has brought to their organizations.
Over the past ten years, cost of ownership has migrated from an evangelical topic at a select few firms to a highly integrated part of corporate cultures. The driving force that propelled COO into the lime light was the severe disadvantage U.S. manufacturers faced during the 1980's in their cost of capital. They needed a tool to help them employ their higher cost assets more efficiently. Cost of ownership proved itself successful and has since been adopted by many major manufacturers and suppliers regardless of geographic location.
COO is an implementation of Activity-Based Costing (ABC) that helps in understanding all costs associated with a decision. It improves decisions by relating costs to the products, processes, and services the drive the cost. Without such a linkage, it is difficult for organizations to understand the full impact of their decisions on their operating cost structure. With this linkage, COO provides a consistent data-driven method for arriving at important strategic and operational decisions.
Cost of ownership provides an objective analysis method for evaluating decisions. First, it provides a clear estimate of the life-cycle cost. The analysis highlights details that might be overlooked, thus reducing decision risk. COO can also evaluate processing and design decisions. Finally, COO provides communication between suppliers and users. They are able to speak the same language, comparing similar data and costs using the same analysis methods. Both suppliers and manufacturers can work from verifiable data to support a purchase or implementation plan.
Developing a COO analysis strategy and reengineering business processes identifies opportunities for using COO results to support management decisions. While the perspectives may differ for the manufacturer and their suppliers, both can benefit greatly from using COO analyses in a "win-win" manner. The supplier who provides the most value will ultimately win in the marketplace. The following questions identify some business decision opportunities for applying COO analyses:
Which supplier provides the most cost-effective tool or consumable?
Should we purchase a higher capacity tool to support future production?
What is the impact of a change in materials at a process step?
What is the impact of a component change or upgrade in a process tool?
Does the equipment upgrade provide a positive return on investment?
Which yield improvement project has the highest overall value?
What is the impact of process parameter changes?
What is the impact of changes to equipment operating conditions?
What are the costs of idle time, down time, and setup time?
Should we replace an existing tool with a new tool?
Cost of ownership can be applied to many different situations involving equipment, processes, and materials. The benefit of these analyses is applicable to both suppliers and manufacturers. The areas typically examined from a COO perspective are:
Materials, components, and subsystem impacts
Technology evaluation and manufacturing approach
Process and manufacturing optimization
New factory planning
In the end, cost of ownership proves a highly leveraged value to both the supplier and end use communities by tying their technical, operational, and strategic decisions to the bottom line.
The ability to effectively identify cost drivers and manage cost reductions is a competitive advantage. TWO COOL® is the only comprehensive set of Cost of Ownership (COO) and Overall Equipment Effectiveness (OEE) analysis tools that deliver on the promise of bottom line performance. Whether you need to know the cost impact of capital equipment purchases, alternative processes, or OEE improvements, TWO COOL® is THE choice.
Has TWO COOL® helped our customers? Examine the list of benefits that our customers developed for us, then ask yourself, can I really afford not to use TWO COOL®?
TWO COOL® benefits:
Improves cash flow through capital expenditure avoidance
Supports "Green" initiatives by analyzing disposal/reprocessing alternatives
Quantifies material usage reduction costs
Drives product cost reductions
Locates opportunities for process step cost reductions
Reduces operating costs
Helps rank projects by return on investment (ROI)
Helps technical staff to understand business implications of decisions
Determines where time and money should be spent
Helps management and line staff communicate more effectively
Helps suppliers and customers communicate more effectively
Helps finance and technical personnel communicate more effectively
Makes the decision process more objective
Works in both new and existing factories
Supports both large and small expenditure decisions
Works on wide range of technologies
Easy to learn
Used by most leading suppliers and manufacturers
Reduces data collection through compliance to existing SEMI® Standards
Shares data with other operational models
Works in PC environment, no special hardware or software required
Saves you money
Call today for more information from Wright Williams & Kelly, Inc. Providing business
solutions for productivity and cost management since 1991.