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    Study on Selection and Optimization of Life

    Cycle Warranty Cost Driver Based on Value

    Engineering

    YANG Hong-xiong1.2

    1.School of Management, Tianjin

    University

    Tianjin 300072, China

    E-mail: [email protected]

    LIU Yi-liu1

    1.School of Management, Tianjin

    University

    Tianjin 300072, China

    [email protected]

    SUN Chun-ling2

    2.School of ManagementTianjin

    University of Technology

    Tianjin 300384, China

    E-mail: [email protected]

    AbstractBasing on research background and status

    quo of cost drivers selection and optimization theorythemodel of warranty cost driver selection which include

    design phase warranty cost driverproduction phase

    warranty cost driver after-sale service stage warranty cost

    driver is building in the paper with Value Engineering

    theory. The paper also expatiates on judgmental methods

    aiming at computing results and optimization methods of

    warranty cost drivers in different stages. The model releases

    from selecting pattern of warranty cost drivers rely on

    complex calculations and simple empirical judgment. The

    scientific practical warranty cost drivers management means

    are introduced, and they are more suitable to enterprises

    actual operation.

    KeywordsValue Engineering; life cycle; warrantycost driver; selectionoptimization

    INTRODUCTION

    Its early for foreign experts to have a research on cost

    drivers selection and optimization theory. In 1997,

    Schniederjans & Garvin[1] researched into cost drivers

    selection by using Multiobjective Programming; in 2001,Pro. Carseten Homburg

    [2]created a model for allocating

    eliminated cost driver by using cost driver combination. 5

    years later, OuYang Liyun and Zhao Jianmei[3]

    supplemented some work in the previous model of Pro.

    Carseten Homburg by using statistics, which made

    correlation analysis and hypothesis test in cost driver. At the

    same year, according to compare and analyze the combined

    substitution model which is constructed by Carseten

    Humburg for selecting numbers of cost drivers, Zhao

    Huifang, Xu Jun and Zhang Xuan[4] proposed to decide

    weight assignment of the model by using regression

    analysis, and to reduce the number of cost drivers to

    simplify the activity cost system and improve the modelspractical operability by combining the cost driver.

    In addition, Wu Haowen, Wang Yiping[5]

    , Du Xiaoxu[6]

    had a qualitative discussion on selecting cost drive, Cen

    Bin[7]

    , Liang Cangyong, Chen Jianbin[8]

    , Deng Houping>@

    selected cost driver by using Multi-objective 0-1

    programming, 0-1 Fuzzy Objective Programming, Analytic

    Hierarchy Process (AHP) and other methods; Babad &

    Balachandran[10],Wang Xinping,etc[11] Xu Ling[12], Li

    Buxi[13,14], Yu Zhe[15] took methods of Linear Regression

    Analysis and Partial Correlation Analysis into cost driver

    selection model, they improved the judgment accuracy;

    Fang Jun, Chang Hua, Huang Kan[16]

    had a research on

    selecting and combining the cost driver. All processes of

    these methods for selecting and combining cost driver is

    complicated, so its hard for mostly managers to grasp.

    SELECTION MODEL OF PRODUCT WARRANTY

    COST DRIVER BASE ON VALUE ENGINEERING

    The meris of selection and optimization of warranty

    cost driver bases on value engineering are showed following:calculating substance cost is non-sense when the products

    structure changed, the original parts could be canceled or

    transformed thoroughly; but no matter how alterative the

    product structure is, product warranty of customers needs is

    always there, so it can take a comparison of warranty cost

    driver between new and old products or improved and

    non-improved products.

    A. The Definition of Every Phase Warranty Cost Driver

    Function in Life Cycle

    The definition of design phase warranty cost driver

    function: elements of impacting product warranty function

    Sponsored by the National Nature Fund 70671071

    978-1-4244- 7618-3 /10/$26.00 2010 IEEE

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    in design phase, such as product function, customers need

    in price, enterprise ability in resource.

    The definition of production phase warranty cost

    driver function: in order to avoid disorder in function, some

    product warranty inputs of time, resource, and energy are

    prepared in process of production.

    The definition of after-sale service phase warranty cost

    driver function: products in guarantee period, in order to

    ensure normal use of customers, artificial maintenance cost

    (service time, service number), materials cost should be

    input, and cost of building, using and maintaining warranty

    service facilities, logistic supply, personnel training and

    other management payments.

    B. The Arrangement of Warranty Cost Driver

    According to those definitions mentioned above, the

    function system drawing is arranged as figure1:

    FIGURE1 THE FUNCTION SYSTEM DRAWING OF WARRANTY COST DRIVER

    C. Assessment of Warranty Cost Driver Function

    At first, confirming standards of warranty cost driver

    function, obtaining function important factor. Collecting and

    arranging facilities design drawing, records and summary,

    according to system structure, performance data and

    operating requirement in some certain product functions,

    confirming functional standards of warranty cost driver

    system and its subsystem; building state feature space for

    describing system cost driver; comprehensive analyzing

    function weight of every cost driver, both big and small

    plans for maintaining facilities, and facilities and parts for

    Synchronous maintaining in system, depending on every

    technical states and failure diagnosis to confirm function

    important factor corresponding to product warranty cost

    driver. The process is as follow:

    The first step, putting every score in table together, so

    warranty

    cost

    driver

    function

    design phase warranty

    cost driver function f1

    after-sale

    service

    phase

    warranty

    cost driver

    function f3

    production phasewarranty cost driver

    function f2

    design cost driver function of product function warranty f11

    design cost driver function of customers need in price f12

    design cost driver function of enterprise ability in resource f13

    warranty cost driver function consumption of time f21

    warranty cost driver function consumption of resource f22

    warranty cost driver function consumption of energy f23

    maintenance cost driver function of numbers f311

    maintenance cost driver function of resource f312

    maintenance cost driver function of time f313

    maintenance

    cost driver

    function f31

    managementc

    ost driver

    function f32

    payment driver function of building warranty service

    facilities f321

    payment driver function of using and maintaining

    warranty service facilities f322

    payment driver function of logistic supply f323

    payment driver function of personnel training f324

    payment driver function of other management

    payments f325

    economic cost driver function f33

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    to show corresponding functions result.

    31 21 2 3

    1 2 3 1 2 3 1 2 3

    1311 1211 12 13

    11 12 13 11 12 13 11 12 13

    2321 2221 22 23

    21 22 23 21 22 23 21 22 23

    31 32 3331 32 33

    31 32 33 31 32 33 3

    , ,

    , ,

    , ,

    , ,

    ff ff f f

    f f f f f f f f f

    ff ff f f

    f f f f f f f f f

    ff ff f f

    f f f f f f f f f

    f f ff f f

    f f f f f f f

    1 32 33

    311 312 313311 312 313

    311 312 313 311 312 313 311 312 313

    321 322321 322

    321 322 323 324 325 321 322 323 324 325

    323 324323 324

    321 322 323 324 325 321 322

    , ,

    ,

    ,

    f f

    f f ff f f

    f f f f f f f f f

    f ff f

    f f f f f f f f f f

    f ff f

    f f f f f f f

    323 324 325

    325325

    321 322 323 324 325

    f f f

    ff

    f f f f f

    calculating corresponding functions final score. Theformula is as follow:

    11 1 11 12 1 12 13 1 13

    21 2 21 22 2 22 23 2 23

    31 3 31 32 3 32 33 3 33

    311 3 31 311 312 3 31 312

    313 3 31 313

    321 3 32 321 322 3 32 322

    3

    , ,

    , ,

    , ,

    ,

    ,

    f f f f f f f f f

    f f f f f f f f f

    f f f f f f f f f

    f f f f f f f f

    f f f f

    f f f f f f f f

    f

    cc c u u u

    c c c u u u

    c c c u u u

    c c c c u u u u

    c c u u

    c c c c u u u u

    c23 3 32 323 324 3 32 324

    325 3 32 325

    ,f f f f f f f

    f f f f

    c c c u u u u

    c c u u

    The benefit of this way of assigning score and

    calculating is to equal every function final score to its

    function important factor (the weight of score), no need

    calculating any more.

    Secondly, confirming constraint states according to

    states of design, production, major or minor repairs, solving

    every drivers value of actual cost corresponding to productwarranty function. The product function warranty of every

    phase needs a certain support of cost, that is some inputs of

    manpower and material resources in certain techniques, its

    equal to every drivers value of actual cost, its easy to get

    by measuring in one enterprise.

    Finally, using i ii

    ii

    i

    F fV

    cCc

    c

    , that is the ratio of

    the function important factor of product warranty cost driver

    and the cost coefficient, solving the cost coefficient of cost

    driver, confirming to consider optimal cost driver firstly,

    and making a support to improve the next cycle production.

    In the formal, Vi the value coefficient of cost

    driver for the number of I;Fithe function important

    factor of cost driver for the number of I;Cithe cost

    coefficient of cost driver for the number of i

    Vi1, there maybe three reasons:1, the cost is a little

    low at present, so that the function which it should have is

    not achieved, so it should be put into the scope ofoptimizing cost driver, and to consider how to strengthen

    cost driver;2, the function supported by cost driver at

    present exceeds the function level which it should have, it

    exists excess functions, it also should be put into the scope

    of optimizing cost driver, and to consider how to remove

    excess functions;3, there are some particularities in

    technology and economy for evaluation objects, in the

    premise of achieving the function, the cost is a little low, so

    it should not be put into the scope of optimizing cost driver.

    Vi=it means that the actual cost of warranty cost

    driver matches its function, in this state the cost driver is

    considered to be ideal.

    Basing on the logic causality, the mapping and the

    specificity between product function warranty system and

    warranty cost driver, and the predictability for warranty cost,

    then according to some methods, the lowest cost

    corresponding to every cost driver function can be solved,

    the deviation from cost C0; or making the function

    score be comparative accurate, the deviation from score fi0, base point is not needed.

    OPTIMIZATION OF LIFE CYCLE WARRANTY

    COST DRIVER BASED ON VALUE ENGINEERING

    Optimization of design phase warranty cost driver:

    basing on the score of Vi to select the object in this phase,

    according to using failure mode and effects analysis

    (FMEA), to confirm the parts name, the failure mode and

    the failure reason of causing the function failure, then to

    improve the design, avoid the failure and alleviate the

    consequence or to help to find the way of detecting failures.

    Optimization of production phase warranty cost driver:

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    basing on the score of Vi to select the object in this phase,

    according to analyzing the impact of every units cost driver

    in product function of production phase, to propose some

    advisable preventive and improvement measures in different

    states, so improving the facilitys reliability. State function

    analysis are showed in table1.

    TABLE 1 STATE FUNCTIONANALYSIS OF PRODUCT AND CORRESPONDING COST DRIVER

    State property better state good state general state failure statefunction state Function well Function drop function drop much all function lose

    Cost driver

    state

    Facility function

    and cost are

    matching better

    Facility function and

    cost are matching well

    Function and cost are

    matching general cost

    drivers enter supervising

    function and cost are

    matching badlycost driver

    enter optimizing and control

    Optimization of after-sale maintenance phase warranty

    cost driver: basing on the score of Vi to select the object in

    this phase, according to using FMEA to structure all failure

    modes of after-sale maintenance phase cost driver, to

    confirm their higher influences on product function, this is a

    strengthening comprehensive analysis in analyzing warranty

    cost driver. What to illustrate is that its not the same with

    the consequence of FMEA in design phase, the consequence

    of FMEA in after-sale maintenance phase should take cost

    driver analysis on the major failure according to actual

    after-sale maintenance, and to make the optimization of cost

    driver well targeted. In this phase, the first thing should be

    considered are what kinds of cost driver corresponding to

    failure modes are more emerging in actual condition. The

    failure mode driver which has a higher emergence and

    obvious influence should be put into the preferred position

    of analysis; the failure mode driver which has a lower

    emergence should be put after the failure mode driver which

    has a higher emergence (exception of failure mode driver

    which has more serious consequence).

    CONCLUSIONS

    The selection and optimization model of cost driver

    based on value engineering takes a break in selecting cost

    driver that relies on complex calculate or simple experience

    judgment, it draws warranty cost driver management which

    is scientific, practical and more actual for operating into the

    model, and makes improvements of convenience and

    efficacy for decision.

    REFERENCES

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    Based on ABC [J]Journal of Beijing Jiaotong University Social Sciences

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