## Phase 

# I: Vertical Axis Baseline Clothes Washer Manufacturing Cost Assessment Presentationto Departmentof Energy Workshop March 11-12, 1998
\. Arthur D. Little, Inc. Acorn Park Cambridge, Massachusetts 02140-2390 (617) 498-5000 Reference

# I Clothes Washer Manufacturing Cost Assessment PhasedProgram 

# The program was divided intotwo phases to provide for stakeholder review and comments.

- 

# Phase I \

# -----~ Provide a detailed and objective cost estimate of two state-of-the-art, high volume, vertical axis clothes washer for further analysis

Develop a differential cost estimate for a proprietary vertical axis design and for two commercially available horizon-ta! axis designs

23814/dV3/51981SM 1•) 

## ..., 

### Clothes Washer Manufacturing Cost Assessment Phase I Objectives 

# Phase Ifocused on developing the methodology and baseline costfor stakeholder review.
• Develop a clear and consistent manufacturing cost assessment methodology for clothes washers • Provide a detailed manufacturing cost of a high production volume "typical" clothes washer for a baseline estimate • Report the results of the analysis in a way that preserves confidentiality of data • Obtain input from all stakeholders as to the validity of the methodology and on the "reasonableness" of the baseline manufacturing cost estimates

23814/dV3/5/98/SM 2

### Clothes Washer Manufacturing Cost Assessment Program Plan 

## The Phase I program is complete and we have initiated a cost assessment ofthe prototype V-axis washer.

Task 1: Tear Down of Baseline Vertical Axis ClothesWashers Task2: Manufacturing Cost Estimate Task 3: Stakeholder Review of Cost Estimate and Production Facility Review Task4: Final Report

- -- - -- -- - Phase II - '**--------~~·** -**~**

Task 1: Construct a BOM for Horizontal Axis Design (2) Task2: Construct a BOM for Whirlpool Prototype Task 3: Manufacturing Cost Estimates Task4: Review Manufacturing Cost Estimates and Processes with stakeholders Task5: Revise Manufacturing Cost Estimates Task 6: Final Report 

### ,A Meetings +Report
23814/dl/3/5/98/SM 3

### Manufacturing Cost Assessment Methodology Technical CostModeling Process 

# The cost assessment approach is very effective in comparing competing design approaches or processes because the structure is independent ofthe product or process. ProductSpecifications PartWeight, Size, Count (teardown) Production Volume (IndustryAnalysis) Material and Component Database Cost, Dens... Colded Rolled Steel 304 Stainiess Steel Polypropylene Process Database Equipment Cost, Depreciation Life... Large Press Injection Molding PowderCoating Financial Factors Output per Day Work Days perYear Wages Equipment Uptime Component1 Materials Assembly Labor Equip. Utilization Indirect Materials 2 3
rials rials Full Production Cost Summary Direct Materials Direct Labor Overhead Indirect Materials Indirect Labor Equipment + Bldg. Depreciation Maintenance Utilities Truces and Insurance

23814/dV31519BISM 4

### _,**·~** 

### Manufacturing Cost Assessment Methodology StructuredBill ofMaterials 

## From the physical teardown we create a product specification which is represented by a structured bill of materials.
v OD or Avg Max Proj Weight (lbs) Scrap Material 1.00 Tub & Basket Assembly ? #I Width Thknss Thknss Length Area Steel I Other % Cost,$ Part No. Description CateQorv 1.01 Tub Plastic 1 22.5 0.08 0.235 22.5 377.72743 co:·zf :;;:;. 5.520 '<:i'.41iJjg; $1.77 1.03 WaterLevel Box Plastic 1 2.75 0.08 0.14 1.75 5.9395736 :::;;;i't :c:, 0.066**;:::;;;;~KV** $0.02 1.02 Tub to 9.JSPeOsion Seal Rubber 1 2.6 0.15 0.32 1.225 2.4740042 ;;:.::EC l'i·i:'. 0.066 . ::::izifi!:i' $0.10 1.07 Bleadl tube Rubber 1 2.6 0.08 0.25 3.6 2.34 .·.:::t3 ''.ii"' 0.036 1.:·:::;;:;:>: $0.05 1.30 Basket Assv 1.20 Basket I Enamld Steel 1 I 20.5 0.055 I·',·. :'',':·"'":·.:t 18 297.05722 13.500 li''':i':J:i"'"I 15% $3.29 1.22 Lint O:illector Plastic 1 I 13.5 0.075 0.215 4 128.82493 t:C-:'.,i<;;:j 0.475 1:0! ::::t. ·::1 $0.15 1.21 Basket Balancing Ring wN/ater in tt Plastic 1 20.5 0.08 0.25 2 107.33597 P'''''''' .,'H 1.400 .:· ; '''.";<:! $0.45 1.49 UnnerAaltatorAssv 1.50A Fabric Disoenser - Top Plastic 1 3.81 0.1 0.125 1.6 10.260826 .\;::, :' 0.108 ::,·;.·;?,·>';', $0.03 1.508 Fabric Disoenser - Olp Plastic 1 3 0.06 0.175 5.5 7.0685830 k>:''.>**':~** 0.074 i'::;.::.':7:i':: $0.02 1.50C Fabric Disoenser - Bottom Plastic 1 4 0.065 0.28 5 12.566371 1::•:,i.» 0.148 ):.::;;::;!;:· $0.05

1.51 autch O:iwr Plastic 1 3.25 0.075 0.075 0.9 8.2957681 I''.>::.> 0.030**i~~:** :i'J:Jx $0.01 1.52 autch O:iwr Seal Rubber 1 3.15 0.16 0.16 1.5029379 !'''. :··:.!]·' J 0.010 ' .':' :1,:;;:r;, $0.02 1.75 LaNer AaltatorAssv 1.60 Bottom Agitator E!Ming Plastic 1 2.95 0.175 0.175 0.26 2.4975662 :. .ff,/;;:1' 0,016 :;;,;;;;;::; W.01 1.59 BottomAQitator Plastic 1 13.5 0.15 U.15 13 143.13882 >.;c'i •.'oe:W 1.816 !1:-;t:t:;,;:; $0.58 1.58 UoneritowerAQitator Bearing Plastic 1 2.6 0.045 0.125 0.775 2.7646015 ,'/h·: ' 0.016 :S':1"::·;:'·:·:. $0.01 1.57 UooerAattator Plastic 1 3.75 0.15 0.325 11.5 57.5 ;,.:**:~·:,,** . 0.934 ;-;,;;.·.:·" $0.30 1.85 AaltatorClutch Assv .· 0:''f;:i''.'i!i51fl'C:!'**'.:;:l:.::tr:;:~;,!'.'** ;''H.v·:,•: ;,<;,,,: :, '-'**·~''2\::·:: ~.'~'--:-.<:'.·**  ·::.. ;,;"'1(: ':"'·'·:**JC~.:·** 00:'0 ::;: ,:::;.: ·;::.' i, ,''.-;,:**··'.:~·:.** •:· :: ;:.,, :**:::::'.'(.:?,:'';~';'** 1.85 AaltatorClutch Assv 1.56 au1ch Rnnv Plastic I 1 2.82 0.08 0.125 2.265 5.6212203 k'"::; :. 0.052 1.:,c:': .. :<:I $0.02 1.55 Ratchet Stoos Plastic I 4 0.4 0.16 0.2 0.9 0.24 I :::: . .

:.>:' 0.016 I ',::»'':.':'.:I $0.01 1.54 au1ch Bottom Cover Plastic I 1 2.41 0.05 0.065 0.4 1.21171231 ,: / '' 0.006 : : ·1 $0.00 Sub-Totals 22 13.50 10.79 $6.89 

## Combining the BOM with the· materials and component's database we estimate the materials cost ofthe product.

23814/dV315198/SM 5

### Manufacturing Cost Assessment Methodology Fabrication Process Cycle Times 

## We estimate the fabrication process cycle times per component from the teardown analysis and the process database.
Whirlpool Model# LSR7233EQO I Manufacturing Powder Enamel Large lieclum Small Brake Cut& 1.00 Tub & BasketAssembly Axturing Wash Coating Baking Preu Press Press Form Shear Part No. Descrlption 1.01 Tub 10.0 1.0 1.03 Water Level Box 5.0 1.02 Tub to SusnP.nsion Seal 1.07 Bleach tube 1.30 BasketAssv 1.20 Basket 40.0 I 5.0 I 10.0 I 30.0 2.0 1.22 Lint Collector I I 1.211 Basket Balancina Rina wfNater in tt 5.0 I I I l I 1.49 Un""rAaitatorA""" 1.50A Fabric D"""'nser -TOD 1.508 Fabric Disoenser -CUD 1.50C Fabric Di<:nAnser - Bottom

1.51 Clutch Cover 1.52 Clutch CoverSeal 1.75 LowerAaltatorAssv 1.60 Bottom Aattator Bearing 2.000 1.59 Bottom Acttator 1.58 UnnAr/lower Aattator Bearina 1.57 Urn:"'rAattator 1.85 Aaltator Cluti:h Assv 1.85 Aaltator Cluti:h Assv 1.56 Clutch Body 1.55 Ratchet Stoos 1.54 Clutch Bottom Cover Sub-Totals 62.0 5.0 10.0 30.0 3.0 !. • .. •; "" '.1',,'l>' ,0:, ,;:>11**,,,~** •..**~r** ..

### ·" 

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23814/dl/3/5/98/SM 11**;~-**

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### ' ' I< 1:

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# " L 

## L

6I • 

### Manufacturing Cost Assessment Methodology Fabrication EquipmentandLaborEstimates 

# Summing the process cycle times we can estimate the equipment and labor requirements.

r - --**-~** • -· .-..**·~~** -· ---·-. " RMder' EnilTEI Lage Mdlltl 

### Smll 

### Bae at& 

### Fix1ui1YJ 'MEil OBIYJ 

### BM!YJ Ress Ress Ress 

### Fam Sm'**~** 

# . 135.0 15.2 15.2 5.0 34.0 6l5 38.0 57.0 105.5 \.QAA Ui:l #dDSird**Pats~**

### QB-aim a>.OO 

### 22.00 22.00 1.00 6.00 21.00**~.00** a>.OO 

### 38.00 

### #TctaEi:μpTBt

### R;q.taJ 14 2 2 1 4 8 5 6 

### 11**~Eflvktine** 

### 1.00 200 7.00 7.00 1.00 1.00 1.00 1.00 0.00 PduaIQlracrsRq.mj 

### 14 

### 4 14 

### 7 

### 6 8 

### 5 6 

### 6 apprst

## £lvalaicn(MN(ea") 

### $101 SD.13**$1.~** 

### $2.(6 SD.62 SD.fil SD.CB 

# socs SD.17 

### Tcta8Jjprst

### OH(MvS)**~.11** 

### $2.00 $2100 $32.00**~.00** 

### 5819 $1.2'2 

# snoo $2.64 MmiasOBIU"it($) 

### 0.2 

### 5.6 3.7 6.8 6.4 1.9

., ;**~;** "' "'**#~-''-~''-1'** ;;, .w•. ,.;**'J'."J~.** :'.'°>. \,l>'.U,'.·. _.:i '""''"'' 

# Combining the equipment and labor requirements forthe processes with the process database and financial factors determines the direct labor, and overhead costs ofthe product.

23814/dV3/5/98/SM 7

### Phase I Key Assumptions ProductSpecifications 

# Two vertical axis clothes washers were selected forteardown analysis. Baseline Clothes Washer Characteristics: • 27" overall width • 3 wash/rinse temperature settings • Unheated rinse • 3 Settings for load size • 2 wash/spin speeds • 8 or more wash cycles • Super capacity wash basket

23814/dV3/5198/SM 8

### ., -•I 

### Phase I Key Assumptions Manufacturing FacilityAssumptions 

# A "typical practices" clothes washer manufacturing facility was developed forthe baseline manufacturing cost assessment. Baseline Clothes Washer Manufacturing Facility: • Production volume of 1.5 million units peryear • 100 percent capacity utilization • All non-dedicated equipment • "Greenfield" investment • A relatively high degree of automation in majorfabrication processes (painting, stamping, welding) · • Manual final assembly • Typical industry equipment costs, process cycle times and labor content

23814/dV3/519BISM 9

### Phase I Key Assumptions Manufacturing Cost Conventions 

# Our analysis estimates the full production orfactory cost segmented bydirect labor, materials and factory overhead.

Full Production Cost 1 Non-Production Cost**r:-~r-:,...:_,-zj;:"5r:<~<~ /!'.~~;>;-:**  

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# i**corJ)orat~** ·· i costs • I**~-** comp. 13tc.. I ', i**L-----~-----'** 

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# -~~~-1 Costs· •associalE!d •with effi>rts I ! ··•F-.!, 1to**tlf;!!'.f;n~w;** : or iQ'lptovE!d ! produdfS or .. ;**produ~tion**

processes, : c6de .. ···•··•· ' compfiance : \·Modemiz8tion 

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1 Tax Refonn Act of 1986, essentially, requires companies to measure cost of goods sold as the full production cost of the goods sold.

23814/dV315198/SM 10

### " 

### Phase I Key Assumptions Manufacturing Financial Factors 

## The financial factors are based on general industry practices

Work Days per Year 240 days Shifts per day 2.5 shifts Runtime per Shift 8 hrs Lot Size 3 work days Equipment Uptime 

### 90% Assembly Downtime Wages $24 per hour Capital Recovery Rate Equipment Depreciation Life 14 years Maintenance 4

### % of Equipment Cost Utilities 1 .7% of Materials Cost Taxes 

### 0.9°/o of Factory Cost Insurance 

### 0.8% of Factory Cost

238141dV3/51981SM 11

### ,, 

### V-Axis Baseline Manufacturing Cost 

### SegmentedbyKey Sub-assemblies 

## The aggregated manufacturing cost of the baseline v-axis clothes washer is $203.51.

Tub 

### & Basket $12.37 $5.90 $10.06 $28.34 Transmission/Motor $37.88 $6.89 $9.97 $54.74 Suspension $4.32 $2.40 $3.10 $9.82 Pumps, Controls, and $27.93 $2.63 $3.25 $33.81 Valves Cabinet $21.83 $7.08 $14.27 $43.18 Misc. 

### & Final Assembly $22.29 $6.59 $4.74 $33.61

.. 

### .Total $126.63 $31.48 $45.40 '. .$203;5,1, .

## <

, '•

23814/dl/3/5/98/SM 12

### V-Axis Baseline Manufacturing Cost Overhead CostBreakdown 

# Based on the financial factors and productteardown the factory overhead is 

# 22o/o ofthe full production cost.

I 

### ii -- -- 

### Cost Category I 

### Cost Basis 

### I I i 

### I I 

### Indirect Labor 

### $11.71 Teardown and industry analysis Indirect Materials 

### $19.07 Teardown analysis Maintenance 

### $2.57 4.0o/o of total capital investment Utilities 

### $2.48 1 . 7°/o of material costs Depreciation 

### $6.11 Teardown analysis Taxes 

### $1.83 0.9°/o of full production cost

... 

### Insurance 

### $1.63 . 

### 0.8% of full production cost Total 

### $45.40

23814/dV3/5/981SM 13., 

### V-Axis Baseline Manufacturing Cost Investment 

# Based on a greenfield sitethe aggregated fixed cost (equipment, tooling and building) is $176 million.

Tub & 

### Basket $42 $35 

## $77 Transmission/Motor $16 $13 $29 Suspension $5 $4 $9 Pumps, Controls, $3 $2 $5 and Valves Cabinet $25 $21 $46 Misc. & 

### Final Assembly $5 $4 $10 Totals $96:million 

## . $BO

# rnilli~n 

# .. $t7S milllon '•·

23814/dV3/5198/SM 14

# .. Variability and Uncertainty in Costs Key Parameters 

# To better understand the impact ofvariability and uncertainty in the cost estimate we conducted sensitivitiy analysis and Monte Carlo simulations on several parameters.

Labor Rate Uniform 

### $17 to 

### $28 per hour Plant Output Triangular 

### 900,000 to 

### 1.5 million 

### 1.5 million Equipment Depreciation Uniform 

### 7 to 

### 15 Life Total Investment Triangular 

### 50°/o to 

### 150°/o 100°/o Multiplier Maintenance Uniform 

### 2.5% to 

### 5.5°/o 4°/o •**~.F1 ~-**  

### Equipment Uptime Triangular 

### 70°/o to 

### 95°/o 90o/o Utilities Triangular 

### 1% to 

### 3.5% 1.7°/o

23814/dV315198/SM 15

### Variability and Uncertainty in Costs 

### LaborRate 

## Sensitivity analysis on labor rate (baseline

# = $24/hr) indicates an impact of approximately 

# + or - 5 percent.

$210.00

Z" $205.00 

## c :I**~** 

### ..... 

## ... GI 

### i $200.00

### ~ 0 'lii 0 (.) $195.00
$190.00

17 19 21 23 Cost of Labor ($/hr) 25 27

23814/dV3/5198/SM 1 6

### Variability and Uncertainty in Costs 

### ActualPlant Output 

## Sensitivity analysis on actual plant output {baseline 

# = 1.5 million/year) indicates an impact of approximately 

## + or - 1.4 percent.

$211.00 $210.00 $209.00 

# -- 

# - ·2 ::I 0 $208.00

........ 

## ... Q) .s= 

# = $207.00 3:


## ... Q) a. $206.00 iii 0 0 $205.00 $204.00 $203.00 $202.00 -1------+------+-------l----+-----+-------f 900,000 1,000,000 1,100,000 1,200,000 1,300,000 1,400,000 1,500,000 Actual Output (Washers per Vear)

23814/dV3/5/9BISM 17

# . ' 

### Variability and Uncertainty in Costs EquipmentDepreciation Life 

## Sensitivity analysis on equipment depreciation life (baseline

# =14 years) indicates an impact of approximately+ or - 2.3 percent.
$210.00 $209.00 $208.00

.-. $207.00 

# - ·2 :::s**~** 

# -= $206.00 GI**~** I/I IU == - $205.00 0 

# - I/I 0 0 $204.00 $203.00 $202.00 $201.00 7 8 9 10 II 12 13 14 15 Average Depreciation Life (years)

238141dV3/5/981SM 1 8

### Variability and Uncertainty in Costs Total Investment 

## Sensitivity analysis on total investment {baseline= $176 million) indicates an impact of approximately 

# + or - 2.2 percent.

$208.00

:::- $206.00 ·2 :II 0

....... 

## ... Cl> s: 

# = $204.00 3:


## ... Cl> Cl. 

# - Ill 

## 8 $202.00
$200.00

50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% Investment Factor (multiplying estimated equipment investment)

23814/dV3/SJ98/SM 19' 

# . Variability and Uncertainty in Costs 

### Maintenance Cost 

## Sensitivity analysis on maintenance cost {baseline

# = 4o/o) indicates an impact of approximately 

## + or - 1 percent.

$206.50 $206.00 $205.50 $205.00



# -- 

# - $204.50 

### ·c: :II Cit

....... lii $204.00 s:. Cl) Ill 3: $203.50 

# - 0 

# - Cl) 0 $203.00 0 $202.50 $202.00 $201.50 $201.002.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% Maintenance as % of Depreciation

23814/dV3/5/981$M 20I. - ) 

### Variability and Uncertainty in Costs 

### Equipment Uptime 

## Sensitivity analysis on equipment uptime (baseline

# =90o/o) indicates an impact of approximately 

# + or - 

# 0.9 percent.

$206.00
$205.50

...... $205.00 

# - ·c: :I 0 ':' $204.50 Cl) s= Ill Ill 3:: $204.00 0 ;; 0 CJ $203.50
$203.00
$202.50

70% 75% 80% 85% 95% Uptime(%)

23814/dV3/5198/SM 21L - t 

### Variability and Uncertainty in Costs 

### Utilities Cost 

## Sensitivity analysis on utility costs {baseline= 1.7%) indicates an impact of approximately+ or -1.8 percent.

........ 

# - c :I $207.00

$206.00**~** $205.00 

## ... GI .s::. II)

### ~ 0 $204.00 0 0 0 $203.00

$202.00

s201.oo-l-------+------+-------+---------i1-------t 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Utility Cost as % of Final Cost

23814/dV3/5198/SM 22

# .• 4) -··**~·** 

### Variability and Uncertainty in Costs Monte Carlo Simulation 

# Monte Carlo simulation ofthese seven key parameters together indicates with 95% certainty a costvariation between $197 and $232 for the aggregated baseline. ·

1,000Trials Forecast: Aggregated Cost Frequency Chart 2 Outliers .031**.--~~~~~~~~~~~~~~~~~~~~~-** 31

## ~ 

# ·- 

# - ·- .023 .Cl .016 

# = .Cl Q


## ..... 

# c.. .008 .000 $180.00 $197.50 $215.00 ............................. ·- 23.2 

### -ri


# ..... C"'D

............................ - 15.5 

# -=

$232.50 

## c C"'D 

# =

................ - 7.75

### ~

I - 0 $250.00 Certainty is 95.30% from $196.10 to $237.17 $

238141dV31519BISM 23

### Clothes Washer Manufacturing Cost Assessment Phase I Results 

# Phase I provides a consistant methodology and aggregated baseline costfor stakeholder review.
• A clear and consistent manufacturing cost assessment methodologyfor future cost analysis of higher efficiency designs • A baseline manufacturing costof $203 for a high production volume "typical" clothes washer • An aggregated baseline cost estimate of two vertical axis clothes washers without revealing specific manufacturer's designs.

23814/dV3/51981SM 2 4