Open Access Journal Article

Manufacturing Cost Estimation Using Piecewise Function Approaches

by Eren Sakinc a  and  Alice E. Smith b,* orcid
a
Bayer Pharmaceuticals, New Jersey, USA
b
Department of Industrial and Systems Engineering, Auburn University, Auburn, USA
*
Author to whom correspondence should be addressed.
JEA  2023 2(3):40; https://doi.org/10.58567/jea02030007
Received: 8 April 2023 / Accepted: 20 May 2023 / Published Online: 22 June 2023
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Abstract

This paper describes two novel approaches to cost estimation of manufactured products where a data set of similar products have known manufactured costs. The methods use the notion of piecewise functions and are (1) clustering and (2) splines. Cost drivers are typically a mixture of categorical and numeric data which complicates cost estimation. Both clustering and splines approaches can accommodate this. Through four case studies, we compare our approaches with the often-used regression models. Our results show that clustering especially offers promise in improving the accuracy of cost estimation. While clustering and splines are slightly more complex to develop from both a user and a computational perspective, our approaches are packaged in an open-source software. This paper is the first known to adapt and apply these two well-known mathematical approaches to manufacturing cost estimation.

Keywords: Artificial intelligence; cost estimation; non-parametric modeling; clustering; splines; cross-validation; dissimilarity index;
Copyright: © 2023 by Sakinc and E. Smith. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Sakinc, E.; E. Smith, A. Manufacturing Cost Estimation Using Piecewise Function Approaches. Journal of Economic Analysis, 2023, 2, 40. https://doi.org/10.58567/jea02030007
AMA Style
Sakinc E, E. Smith A. Manufacturing Cost Estimation Using Piecewise Function Approaches. Journal of Economic Analysis; 2023, 2(3):40. https://doi.org/10.58567/jea02030007
Chicago/Turabian Style
Sakinc, Eren; E. Smith, Alice 2023. "Manufacturing Cost Estimation Using Piecewise Function Approaches" Journal of Economic Analysis 2, no.3:40. https://doi.org/10.58567/jea02030007
APA style
Sakinc, E., & E. Smith, A. (2023). Manufacturing Cost Estimation Using Piecewise Function Approaches. Journal of Economic Analysis, 2(3), 40. https://doi.org/10.58567/jea02030007

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