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1.4 The concept of cost engineering in diesel engine system design
in exhaust restriction caused by soot loading changes in the DPF. Exhaust restriction (the pressure drop across the aftertreatment system) significantly affects turbocharger matching and engine system design. When the exhaust restriction becomes higher, the turbine expansion ratio and the engine air flow rate usually reduce. This results in a decrease in peak cylinder pressure but an increase in exhaust manifold gas temperature. The nominal design point of turbocharger matching is dependent on exhaust restriction. Unlike the muffler-only exhaust system that has a deterministic back pressure at the rated power condition, modern diesel engines equipped with a DPF have a randomly fluctuating back pressure over time, increasing during the soot accumulation phase or decreasing after DPF regeneration. Matching the turbocharger for a clean DPF or a fully loaded DPF yields very different results. If the probabilistic distribution of the exhaust restriction during the vehicle lifetime can be found, the turbocharger can be matched better to balance the system efficiency and durability.
Like design for target, design for variability/reliability is often carried out with optimization techniques. In reliability-based design optimization (RBDO), in order to reduce computing time, it is useful to first conduct a deterministic optimization to pre-screen, and then apply the probabilistic variations of the uncertainties to the pre-screened sub-optimal solutions for further optimization. The RBDO usually consists of the following steps:
1. Deterministic design-of-experiments (DoEs) variable pre-screening to identify key factors.
2. Deterministic DoE response surface fit to build emulator models.
3. Non-time-dependent nondeterministic variability analysis with key factors.
4. Time-dependent nondeterministic reliability optimization with key factors.
5. Confirmation runs.
These optimization topics are elaborated in Chapter 3.
1.4 The concept of cost engineering in diesel
is accompanied by cost. Profit is the difference between revenue and cost.
The precise definitions of these economics terms are provided by Ostwald and McLaren (2004). Design for profit is a process with target costing where the effects of the design are evaluated for demand, revenue, cost, and profit, and the profit is maximized in engineering design and decision making.
The essence of design for profit is to ensure that the product meets a target market price to allow product competition. Another important concept in cost engineering is value. Value is defined as a function-to-cost ratio, or cost effectiveness. Maximizing value should be also considered in design.
1.4.2 The need for engine system cost analysis
Many engine development programs failed due to ineffective control of product cost and price. In today’s highly competitive market, customer requirements on engine product functionality are increasingly stringent. Better fuel economy, higher power, faster acceleration, lower noise, and longer reliability life are a few examples. On the other hand, the increasingly booming supplier industry is trying to provide engine manufacturers with a wide range of components or modularized subsystems with advanced or luxury features. Two-stage variable-geometry turbocharger, electric boosting, camless valvetrain and hybrid powertrain are several examples. An engine product can be developed by throwing in many advanced features simultaneously to achieve superior functional performance, but it may not be financially viable at all. There is a pressing need for system cost integration and control during engine development in order to design the least expensive product while meeting customer requirements.
Although cost reduction opportunities exist in almost all engine components, there are three main aspects that drive a high product cost, namely emissions compliance, fuel economy improvement, and advanced features.
The components with major cost increase for low-emissions engines include the following (in order from high to low):
∑ aftertreatment (DPF, LNT or lean NOx trap, HC dosing, additional sensors about pressure, temperature and NOx, precious metal loading)
∑ turbocharger (two-stage turbocharger or VGT)
∑ EGR system (larger EGR cooler size, more coolers, more EGR valves, intake throttle valve)
∑ fuel injector (resulting from the requirement of higher injection pressure)
∑ cylinder head (resulting from increased cylinder pressure)
∑ piston and piston rings (resulting from increased cylinder pressure and change in piston cooling)
∑ crankcase (resulting from increased cylinder pressure).
The following technologies may incur high product cost for fuel economy improvement:
∑ hybrid electric or hydraulic powertrain
∑ waste heat recovery with Rankine, Brayton or Sterling cycles
∑ turbocompounding
∑ variable valve actuation
∑ variable compression ratio
∑ variable swirl
∑ cylinder deactivation
∑ continuously variable transmission
∑ flexible cooling.
Advanced engine features associated with high product cost may include the following examples:
∑ high power output (affecting structural strength or engine size)
∑ demanding acceleration characteristics and transient response (related to hardware design and software controls)
∑ powerful engine brake or driveline retarder (for heavy truck applica- tions)
∑ in-cylinder pressure real-time monitoring and closed-loop combustion controls
∑ NVH and noise reduction features (e.g., engine encapsulation or material selection for low noise).
Each of the above items has a heavy weight on overall engine product cost. If each of them is not planned and controlled carefully, the entire engine will be at a risk of high cost.
Many engine development programs failed due to the lacking of cost control or cost design. In diesel engine system design there is a need to plan the integrated cost roadmap for various advanced technologies for their entire life cycles and to coordinate/balance the cost structure of the production design between different subsystems or components. During this cost design process, a proper balance among the four attributes (performance, durability, packaging, and cost) needs to be achieved. Normally, an engineer in the areas of performance, durability, or packaging is not sufficiently knowledgeable or qualified to conduct the system cost design. The cost design requires an in-depth and up-to-date knowledge of the competitive benchmarking product costs for all the engine components and advanced technologies, ranging from the overall powertrain cost of OEM products to the cost of global suppliers’
component products. The cost design also requires a broad knowledge on the relationship between cost and the other three attributes. Moreover, the trend of modularization and integration of subsystem designs in systems engineering environment requires the cost engineer to examine and propose
the most cost-effective approaches on how to conduct the modularization and integration. In addition, the cost engineer also needs to identify the party in charge of the modularization and integration. For example, a supplier may prefer to provide the engine manufacturer with a wholly integrated subsystem of waste heat recovery (consisting of heat exchangers, turbines and electronic controls) and charge a high price for the integrated package.
Although it may look appealing to a performance or durability engineer due to the ease or convenience, this may not be a financially viable option for the engine manufacturer. The manufacturer may prefer to modularize the waste heat recovery subsystem in a different and more cost-effective way to different global suppliers and conduct the integration work by itself without the need for paying a high price to others. A system performance or system durability engineer may be capable of proposing a system design plan to meet the functional or reliability requirements, but he or she is usually not eligible or available to optimize the cost structure of the product. All these cost-based activities have to be planned, conducted, and optimized by a highly qualified cost engineer. It is obvious that such a job function of system cost design is an independent full-time engineering function rather than a small supplemental function attached to the design.
1.4.3 The process of design target costing
The cost design activity of a cost engineer in engine development is a part of the overall financial analysis for the new product development. The financial analysis is characterized by four main phases as explained by Menne and Rechs (2002), namely (1) cost target calculation, (2) piece cost calculation, (3) piece cost verification, and (4) monitoring of running costs. Product cost design occurs from program introduction to Job 1 (start of production). The process of design for profit starts at the top with market price and profit goals.
At the beginning of the program, from a financial perspective, the target product cost is set as the maximum engine cost which allows the market price of an engine, negotiated with a customer, to achieve a certain level of return on net asset. This financial cost target is the fully loaded cost including purchased materials and parts, product tooling, manufacturing labor, warranty cost, etc. Eventually, the cost target is stripped down to the engine system cost of total product materials and parts. The target is then translated by the engine system design team to a technology roadmap through integration and optimization of subsystem design costs while trying to meet customer functional requirements. There is a negotiation and iteration involved during the cost target setting process in order to close the gaps. Sometimes trade- offs need to be made between functionality and cost. The initial established target cost is then distributed among different phases and work areas, and is cascaded downward to lower subsystem and component levels. The target
cost is finalized through iterations and cost reduction activities. Product cost control is conducted by comparing actual reported costs against estimated costs, identifying and focusing attention on those work areas that deviate seriously from the initial estimates.
1.4.4 Objectives of engine system cost analysis
Engineering design drives cost. The cost engineer carries out an engineering design function for the cost–technology structure of the product. The cost engineer is neither a financial controller in program management nor a financial analyst in purchasing or finance. The cost engineer neither plans/
controls engine development labor costs, nor calculates pricing and corporate profitability. Instead, the engine system cost engineer focuses on the technical design of the cost structure of the engine, which is mainly related to materials/
parts cost and product life. The objectives of engine system cost design/
analysis usually consist of the following six types:
1. Corporate cost–benefit analysis for various cutting-edge engine technologies (e.g., aftertreatment, advanced combustion, alternative fuels, fuel economy improvement, or hybrid powertrain technologies).
2. Demand–revenue–cost–profit analysis for engineering design decisions to maximize corporate profitability (i.e., design for profitability).
3. Cost payback analysis to optimize between initial product cost (or standing charge) and running cost (e.g., total cost recovery over time through reduced fuel consumption to offset the higher initial cost).
4. Optimized unit cost structure for selecting engine technologies and balancing subsystem costs with value-based design to meet the functional requirements and the cost target during production engine design.
5. Life cycle cost saving estimate for design improvement.
6. Competitive benchmarking cost analysis.
1.4.5 Classification of cost and factors in cost analysis
Total product cost can be defined as the total of unit manufacturing cost, life cycle cost, and quality loss cost. When using cost to calculate the value associated with a functional requirement (recall that ‘value’ is defined as the ratio between function and cost), it is important to use the total product cost.
The unit manufacturing cost includes all the manufacturing costs such as variable cost, fixed cost and tooling cost. The life cycle cost includes all the operational costs and the costs of warranty, repair, and routine maintenance.
The quality loss cost takes into account less tangible cost incurred by the manufacturer, the customer, and society.
The product cost can also be broken down into two categories: variable cost and fixed cost. The variable cost includes direct material, direct labor, and
variable overhead (e.g., direct material or parts cost, supplier transportation cost, warranty cost, direct manufacturing labor cost, non-wage labor cost, manufacturing tooling cost, and overhead costs). The variable cost changes in total dollar amount with volume. The fixed cost is the one which remains constant in the total amount of dollars throughout a specific period of time even if there are changes in volume. Examples of fixed cost include capital expenditure and fixed overheads. The fixed cost is ‘diluted’ or spread over the volume. The engineering cost can be a part of overheads, or can be handled as a separate item if the expense is exceptionally large. Figure 1.20 illustrates the relationship among costs, price, volume, and profit.
Generally, a cost engineer considers the following factors in order to conduct cost analysis:
∑ variable cost
∑ fixed cost
∑ production methods
∑ production volumes
∑ product life (annual and life cycle mileage, number of hours or years), user usage profiles (e.g., vehicle weight, driving cycle), and operational costs (e.g., fuel cost, oil and maintenance costs, aftertreatment running cost)
Cost or revenue (dollars per year)
Volume of production (units) Loss
Profitable Break even
Total cost
Profit
Fixed costs Direct labor cost
Direct material cost Variable overhead
cost Total net
sales revenue
1.20 Illustration of cost, price, volume, and profit.
Total variable
cost
∑ bill of materials (BOM), or a cost bill-of-materials tree
∑ product specifications and technical drawings
∑ purchasing and supplier source/cost data
∑ interest rate, exchange rate, and inflation rate
∑ depreciation.
Among the above factors, the purchased materials/parts cost and product life are the most important ones for diesel engine system cost engineers.
Moreover, many factors contain a range of geographic or temporal variation or uncertainties (e.g., diesel fuel price, vehicle annual accumulated mileage).
System cost analysis and estimate is not an exact science. For its statistical/
probability analysis the reader is referred to Ostwald and McLaren (2004).
1.4.6 The method of engine system cost analysis
Figure 1.21 illustrates an example of the cost payback analysis with many influential factors included. It is assumed that a device associated with certain engine technology imposes an initial cost for the customer. The device could be any arbitrary one, for example, a waste heat recovery device such as an organic Rankine cycle system, or a diesel aftertreatment device. Engine BSFC or vehicle fuel economy can be improved by using such a device hence the operating fuel cost can be reduced. A straightforward discounted cash flow methodology is used to identify the time period required to recover the cost of the device. The interest rate and net present value are considered to include the time value of the money. The horizontal axis in the figure gives the anticipated annual mileage accrued for a diesel vehicle. The vertical axis
Baseline Technology device cost
= $3000 Diesel fuel price = $2.5/
gallon Vehicle fuel economy = 9 mpg Fuel economy saving = 10%
0 50,000 100,000 150,000 200,000 250,000 Annual mileage (mile/year)
Payback period (years)
16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0
Baseline definition:
Technology device cost = $1000 Diesel fuel price = $1.5/gallon Vehicle fuel economy = 6 mpg
Fuel economy saving by the ‘device’ = 5%
Annual interest rate = 5%
Note: Any operating cost of the secondary fluid associated with the ‘device’ has not been included in the calculations in this figure.
1.21 Cost payback analysis.
shows the time required for the expected fuel savings to offset the device cost. The payback period is the ratio of the amount of money spent on the device to the amount of money saved. It is observed that vehicle mileage has an exponential effect on the payback period. The device cost has a dominant effect on the payback period. Retail diesel fuel price, vehicle fuel economy and fuel economy saving percentage all have very strong effects on the payback period. The general trends that result in a short payback period can be summarized as follows: lower device cost, increased fuel economy, increased mileage, and increased diesel fuel price. For heavy-duty long haul trucks a payback period of less than three years is desirable since many fleets replace trucks after approximately three to four years.
Figure 1.21 is a general purpose illustration to demonstrate the methodology used in cost analysis. It should be noted that in Fig. 1.21 the additional cost associated with any secondary fluid such as the liquid-based urea used in SCR (if the device refers to an SCR system) has not been included. When the operating cost of such a secondary fluid is included, the payback period will be much longer (worse) than that shown in Fig. 1.21.
1.4.7 Review of existing engine cost analysis methods
Fundamental theories of cost analysis and estimating for engineering and management have been provided by Park and Jackson (1984), Ostwald and McLaren (2004), and Humphreys (2005).
In the cost–benefit analysis for automotive technologies, regulatory agencies and research institutes have been largely interested in the cost analysis related to advanced diesel emissions aftertreatment technologies, advanced fuels, well-to-wheel efficiencies of various powertrain technologies, and energy policies. Generally, the conclusions about a particular technology drawn from a global viewpoint of the entire society may not be valid at a corporate level due to the differences in the assumptions of sales volume and other technical or economical factors. Each company has a unique situation, and it is important to develop their own cost–benefit analysis in order to reach a wise business decision.
Walsh (1983, 1984) conducted studies on the costs and benefits of diesel particulate control for the North American market. Browning (1997) provided an overview of the technologies and incremental costs for meeting the US 2004 emissions standards for heavy-duty diesel engines. Burke (2003) used Excel spreadsheet cost models to show the trade-offs between fuel savings and economic attractiveness for different hybrid-electric powertrains (mild and full hybrids) in light-duty vehicles (passenger cars and mid-size SUVs).
State and local agencies use cost-effectiveness as one criterion to decide whether to implement a particular emissions control program. The cost- effectiveness is defined as the ratio of the dollar amount to the unit of effect
produced by the cost. In a Texas government program, Prozzi et al. (2004) investigated the cost-effectiveness of an emulsified diesel fuel for highway construction equipment fleets by thoroughly quantifying many sources of cost impact (e.g., fuel cost penalty, implementation and conversion cost, fuel economy penalty effects, re-fueling penalty, fuel–emulsion mixing cost, cost of lower equipment productivity due to the loss of torque, increased maintenance cost, fuel storage cost, etc.). They concluded that the fuel tested (Lubrizol’s PuriNOx) is a relatively high cost strategy for NOx reduction, and it will become much less cost-effective in reducing NOx emissions as the fleet replaces the older engines with new, cleaner electronically-controlled engines. Matthews et al.
(2005) evaluated the effects of an ultra-low-sulfur diesel fuel on emissions, fuel economy and maintenance cost, and they also calculated the cost-effectiveness in terms of dollars of cost penalty per ton of NOx removed.
Life cycle assessment is a ‘cradle-to-grave’ approach for assessing a technology from production and use to final disposal. Ginn et al. (2004) presented a comprehensive life cycle economic assessment to compare four alternative technologies to conventional diesel engine idling for heavy-duty vehicles. The long haul trucks are idled for a long period of time (e.g., overnight) to heat or cool the cabin, to keep the engine warm, and to run electrical accessories.
The idling time can be 2400 hours per year. It results in a large amount of emissions, fuel consumption, and increased engine wear. Ginn et al. (2004) compared four alternatives (auxiliary power unit, direct-fired heater, truck stop electrification, and advanced truck stop electrification) and assessed their emissions benefits, environmental impact, fuel savings, maintenance/
wear savings, payback period, net present value, and the emissions savings per dollar cost of technology (i.e., the reciprocal of cost-effectiveness).
Li et al. (2004) introduced a demand–cost–profit economic analysis method applied to the design decision making about engine manifold surface finishing. The performance benefits on power and BSFC due to improved manifold surface roughness were simulated with an engine cycle simulation software package. The microeconomic theory and a demand–cost–profit model were introduced along with optimization techniques (to maximize the profit associated with the design) to bridge engine performance simulation, cost analysis and business decision making. This work provided an attempt on design for profit.
Diesel engine system cost analysis is a new and challenging inter-disciplinary field. It will receive increasing attention from the technical community.