A simplified and scalable should-cost tool in the oilfield services industry

[摘要] Third party spend accounts for a significant amount of a business;; costs. When procuring unique, highly-engineered components, this cost is often negotiated with suppliers during the procurement process. Due to the limited understanding of the suppliers;; true production cost, various techniques and models for determining how much a procured product should cost have been tried. One such approach is known as ;;should-cost modeling,;; where estimates for the cost of a product or service are made based on product architecture and/or firm financials. Both these approaches to should-cost modeling require extensive data collection and are time consuming. In this thesis, we expand an approach that uses aggregate industry-specific financial data to develop a simple, scalable tool to estimate a product;;s should-cost. One major challenge in building this tool is unifying the simple aggregate data available into an estimated price for a complex product. This is a major challenge of developing a should-cost estimate using existing methods. We develop an approach to simplifying a complex product, construct our model, and create a ready-to-use tool. We demonstrate the working of the model and the tool using the case of a semi-complex product (the fluid end of a pump) representative of a company;;s procured products. We then compare the price estimated by our model with that currently negotiated with our sponsor company;;s supplier and solicit qualitative feedback from procurement professionals regarding the should-cost tool;;s accuracy. The price estimated by our tool is within 9% of the actual negotiated price and required significantly less time to compute compared to the current approach based on product architecture. The company;;s sourcing and procurement executive strongly endorses the benefits of our approach. This tool can remove the reliance on supplier-supplied quotes and strengthen the purchasing company;;s negotiating position. The tool developed in this thesis is shown to provide a more accurate estimate of product cost, with significantly less estimation effort.

[发布机构] Massachusetts Institute of Technology