=Paper=
{{Paper
|id=Vol-2220/07_CONFWS18_paper_8
|storemode=property
|title=Cost Benefit Analysis in Product Configuration Systems (short paper)
|pdfUrl=https://ceur-ws.org/Vol-2220/07_CONFWS18_paper_8.pdf
|volume=Vol-2220
|authors=Sara Shafiee,Alexander Felfernig,Lars Hvam,Poorang Piroozfar,Cipriano Forza
|dblpUrl=https://dblp.org/rec/conf/confws/ShafieeFHPF18
}}
==Cost Benefit Analysis in Product Configuration Systems (short paper)==
https://ceur-ws.org/Vol-2220/07_CONFWS18_paper_8.pdf
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Cost Benefit Analysis in Product Configuration Systems
Sara Shafiee1 and Alexander Felfernig and Lars Hvam and Poorang Piroozfar and Cipriano Forza
Abstract.1Companies’ reports indicate a mixture of success and can be forecasted. Aiming to investigate these effects, the
failure in Product Configuration Systems (PCS) projects. following propositions were developed:
Moreover, the attention paid to PCS across different industries is Proposition 1. The higher the number of users in PCSs, the
increasing. Therefore, more studies are needed to analyze risks, higher Return on Investment (ROI) and cost-benefits.
costs, and benefits of PCS. This paper uses real case projects to
Proposition 2. The higher the complexity in PCSs, the higher
demonstrate the cost-benefit analysis of PCSs in real industrial
setups. Hence, this article quantifies savings in terms of reduced ROI and cost-benefits.
working hours, and the cost implications with reference to Firstly, we calculate the cost of three different projects during
development, implementation, and maintenance. The study fills the their last four years. Secondly, we calculate the cost-benefits
gap in previous research by addressing what the influence of other during the last four years. In this research, we focus on the saved
factors on gained cost-benefits from PCSs are likely to be. This man-hours in calculating the ROI on multiple case projects in one
study aims to explain why some PCS projects are more cost- case company, while investigating different factors influencing the
effective than the others. While there are a number of factors ROI. Then, the data related to the number of users in the last year
affecting the cost-benefit analysis in PCS, the focus of this study and the complexity of PCSs is retrieved. Finally, based on the
remains mainly on the number of users and complexity of the knowledge in the literature and our research propositions, we
project. The comparison in the case studies revealed that both
demonstrate the results using graphs and discuss the findings.
factors have a positive direct correlation with the gained cost-
benefits from PCSs.
2 LITERATURE STUDY
1 INTRODUCTION In this section, the relevant literatures for calculating the PCS cost-
benefits and PCS complexity are reviewed which will then be
Product Configuration Systems (PCS) enable companies to develop utilized for calculating the ROI and PCS complexity in the cases of
product alternatives to facilitate sales and production processes [1]. this study.
This is achieved through incorporating information about product
features, product structure, production processes, costs and prices
[2]. PCSs support decision-making processes in the engineering 2.1 Cost benefit analysis for PCS
and sales phases of a product, which can determine the most The results from the literature review shows that by utilizing PCS
important decisions regarding product features and cost [3]. PCSs reduced man-hours and lead-time for generating the specifications
affect the company’s ability to increase the accuracy of the cost is acknowledged in numerous previous research [5], [11]–[28].
calculations in the sales phase and consequently increases the Forza et al. [17] demonstrate a reduction in man-hour from 5-6
products’ profitability in sales and engineering process [2]. days to only 1 day through using PCS. Haug et al. [18] elaborate on
PCSs can bring substantial benefits to companies such as, how man-hours in the configuration process can be reduced by up
shorter lead time for generating quotations, fewer errors, increased to 78.4%. Moreover, Hvam et al.’s [25] study indicates that after
ability to meet customers’ requirements regarding product utilization of PCS at the case company, the lead time required to
functionality, use of fewer resources, optimized product designs, generate an offer was reduced by 94–99%. The reduction can be
less routine work and improved on-time delivery [2], [4]–[6]. traced to automation of routine tasks and elimination of the
Although advantages of PCSs are evident, there are still some iterative loops between domain experts, as PCS makes all product
difficulties associated with high cost [2], [7] and considerable knowledge available [29].
chances of failure [8] in their implementation projects. Several researches have quantified the benefits of PCS in terms
The aim of this paper is to evaluate the influence of different of reduced man-hours, lead-time and improved the quality of
factors on the gained cost-benefits of PCS such as employees’ product specifications. However, none of the researchers have
experiences and organizational culture [9][10]. More specifically, investigated the factors which are influencing the cost-benefit
the objective of the paper is to evaluate the influence of the two analysis and why some of the PCS projects are more cost effective
factors on the cost-benefits gained from different PCS projects: (1) than the others. In this research, we focus on the saved man-hours
number of users and (2) complexity. This study also sets out to find which is a simple and quantified indicator to calculate the ROI to
out why some PCSs are more beneficial than the other PCS fill a knowledge gap in the literature.
projects and how the profitability of the PCS projects in the future Discussions concerning the unpredicted costs of PCS projects
indicate that the rough estimates involved in cost analysis are
1 Mechanical Engineering Department, Technical University of Denmark, considered a challenge that needs more attention from academia
Denmark, email: sashaf@dtu.dk [30]. The financial benefits of PCS projects should be clear from
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the beginning, and cost evaluation is important from the initiation differences for the selected factors (number of users and
phase. Cost-benefit analysis is used to compare the expected costs complexity); the similar users (engineers); Almost the same rate for
and benefits for different scenarios and the results from a variety of the using configurators (number of generated quotes); the same IT
actions [31]. ROI, which is commonly used as a cost-benefit ratio, team and the involvement of similar tasks during development and
is a performance measure used to evaluate the efficiency of a maintenance; similar setup of the knowledge; similar software and
number of different investments [32], and has been used to integrations.
determine the profitability of PCS projects [10]. The analysis has been performed during the last 4 years at the
case company which allows us to benefit from the strength of using
multiple case study method [35], [36]. Furthermore, case studies
2.2 Complexity analysis for PCS provide researchers with a deeper understanding of the relations
To measure the complexity of PCS, Brown et al. [33] categorize among the variables and phenomena that are not fully examined or
them into three major components; 1) execution complexity, 2) understood thus far [37], for instance, the factors with an impact on
parameter complexity, and 3) memory complexity. Execution the cost-benefits from PCS projects. There are multiple data
complexity covers the complexity involved in performing the sources such as archived documents and triangulated observations.
configuration actions that make up the configuration procedure
while the memory complexity refers to the number of parameters
4 CASE STUDIES
that system manager must remember. In this paper, the parameter
complexity is the most important category, as it measures the The company selected as the case study produces highly
complexity involved in the knowledge that domain expert provides engineered products and technology. The market environment is
during the creation of the configuration model [33]. Therefore, we highly competitive, and thus delivery time and costs are critical.
assess the parameter complexity in terms of two major parameters The main motivation for implementing the PCS was to reduce the
inside the PCS: attributes and constraints (Table 1). time required to respond to customer inquiries in order to increase
the company’s overall competitiveness. Hence, in this study the
Table 1. Complexity assessment in terms of parameters in PCS [34] focus is on lead-time reduction that leads to reduction in resources
No. attributes No. constraints at the company and directly affects the cost implications.
Low complexity 500 - 1300 200-800 Three selected projects from three different departments with
Medium complexity 1300-2000 800-1200 different number of users and complexities were selected. All three
High complexity >2000 >1200 projects are comparable as (1) they all are selected from one case
company, (2) they are highly engineered-to-order and complex
products, (3) they have been in use during the last 4 years to
3 RESEARCH METHOD support sales processes, (4) they have totally different cost-benefits
The relevant literature was reviewed to clarify the present study’s results, and (5) they have are different in terms of complexity and
position in relation to existing research. This allowed us not only to numbers of users. Table 2 demonstrates the data related to three
ascertain whether this research has the potential to add to the selected sales (commercial) PCS projects. The number of users
existing knowledge but also to identify which parts of the available refers to the sum of the personnel at the company who are using the
knowledge are relevant to this study’s scope. system (e.g. in Case 1, 50 users constantly use the system). The
Cost-benefit analysis has been performed in different research complexity in this research is relatively studied and different
areas by calculating the saved man-hours, increased sales, complexities in different projects is compared.
improved quality and reduction in errors and defects. To date, there
is no research to investigate the factors influencing cost-benefits in Table 2. Number of users and complexity per project
PCSs and to answer why some of the PCS projects are significantly Complexity of the configurator
Number of users
more cost effective. Case Studies (sum of attributes and
per PCS
In the current research, the benefit per quote (in man-hours) and constraints)
Case 1 50 Medium/High = 3400
the total cost of the projects is provided by the company. The
Case 2 13 Medium = 2100
amount of saved man-hours before and after using the configurator
Case 3 10 Low = 600
and the gained benefits based on the saved man-hours are
calculated. In this study, the total cost of each project is calculated
Table 3 illustrates all the figures related to the gained benefits
as the project cost, which includes the development,
based on saved man-hours for each project during the last year.
implementation and the yearly running cost (such as licenses and
maintenance activities) for the last year.
Table 3. Calculation of the total benefits in DKK based on the saved man-
In this research, we use multiple case studies to evaluate two
hours per year
propositions in one ETO (Engineer To Order) company. The
(just based on saved
Benefit per quote in
company is a chemical company producing catalysts and process
hours (saved man-
Number of quotes
licenses) per year
Total benefit per
(development +
maintenance +
Case Studies
configurator
plants and the selected three projects are three catalysts types. The
man-hours)
Total Costs
through
per year
hours)
reason for choosing one case company is to provide the in-depth
year
ROI
data analysis and observed a trend between the selected factors
while all the other factors including organizational culture are
fixed. The criteria for choosing the three project (three catalyst
products) is the maximum similarities between these three PCS Case 1 240 10,3 987.840 527.000 90%
projects to be able to keep other factors constant; the required Case 2 295 1 118.000 157.000 25%
Case 3 270 0,6 65.000 110.000 -40%
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5 DISCUSSIONS
The case study results demonstrate how the number of the users
and complexity of the configurators’ projects have an impact on
saved man-hours and cost-benefits in PCS projects.
Analyzing the correlation of the number of users to cost-
benefits, clarify the fact that if the department is larger and the
potential number of users are higher for one specific PCS, then the
expected benefit regarding saved man-hours from that configurator
is higher (Figure 1). The number of quotations generated for each
of the cases the year before are almost the same (Table 3) but Case
1 saves more man-hours which could be because the time and
number of the users for quotation process is higher compared to the
other cases.
Figure 3. The total cost benefits, number of users, complexity per PCS per
year
6 CONCLUSION
The aim of this study was to measure the influence of the number
of users and the complexity of the PCS project on gained benefits
based on the same man-hours. The empirical data is gathered from
an ETO company based on the previous 4-year results and these
results confirmed the propositions. In detail, the gained benefit,
number of users, and the PCS complexity per year were measured.
The number of users’ data was available from the case company
and the complexity was calculated based on the number of
Figure 1. The total cost benefits related to the number of users per PCS per attributes and the number of constraints in PCS. The PCS
year complexity illustrate the relative complexity in the product. In
order to be able to make the sales configurator for each of these
Analyzing the complexity related to the cost-benefit calculation products, a specific number of input, outputs, and finally attributes,
illustrates a trend in the benefits gained from PCS and their relative constraints, and rules are required in PCS.
complexity ratio. Figure 2 demonstrates a trend between the The analysis led to the conclusion that there is a positive
complexity of the PCS project and cost-benefits implications. correlation between the number of users in one PCS and the level
The complexity is calculated based on the attributes and of direct savings. The higher number of the employees indicates
constraints in each project and shows the size of the product as that PCS can save more man-hours in that specific department. The
well. The results demonstrate that if the company develops a PCS more complex the PCS project, the more time is needed for
for more complex product, the project cost will be higher (Table 3), developing the project which has been calculated as ROI.
and the benefits will be higher conclusively. However, it seems complex projects save more man-hours.
Complex PCS seem to compensate the development efforts and
maintenance hours since in such cases, more stakeholders’ time is
saved to deliver more complicated quotations.
This research is in the first step in exploring the impact of other
factors on the saved man-hours in PCS project. There are lists of
factors which can influence the PCS projects cost-benefit analysis
which can be explored in the future. These factors may be listed as
employees’ experiences and users’ expertise, level of details
included in the configurator, and organizational culture. This study
considers two specific factors as outstanding ones based on the
experience and verified two propositions. In this study, we
provided one case company and three projects with in-depth data
and we observed a trend between the selected factors. Therefore, it
requires further research and additional cases to analyze different
Figure 2. The total cost benefits related to the PCS complexity PCS per factors which may influence the gained benefits from PCS projects.
year Further research is required to cover both the variety of companies
except the ETOs as well as a wide range of case studies.
Figure 3 demonstrates the total cost-benefits, number of users and
complexity of each case project in one year. As discussed before,
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