An Introduction to Parametrics for the Beginner

Part of the Decision Engineering book series (DECENGIN)


This chapter constitutes an introduction to the parametric way of cost estimating. More exactly it is an introduction to one side of this way, the side, called specific parametrics,which consists in extracting useful information from a database built from data belonging to a specific product family: the adjective “specific” employed with the word parametric means that the useful information is related to one product family and cannot be used for any other family.

The useful information which is extracted from the database takes the form of a formula, plus the scattering of the residual information around this formula.

This chapter illustrates one example, the process by which the formula can be built. Starting from the database itself, it first recommends analyzing the data in order to find out any potential problem. As this chapter is only an introduction to the subject, it does not enter into the detailed analysis and just mention a few points. A complete analysis is carried out in Volume 2.

Once this is done, it shows that several alternatives must be tested before a satisfactory solution is found, the lesson being that the data do not reveal their structure very easily and that, consequently, the cost analyst should try different solutions. The first solution which is generally tried starts with the utilization of one characteristic only, and the use of a functional characteristic is recommended. No algorithm is given in this introduction (these are described in Volume 2): only the results are exposed and visualized on graphs. Other characteristics, sometimes built by the cost analyst from the characteristics which are present in the database, are successively tested.

Once the formula has been successfully built, its quality must be assessed and quantified. In this introduction, only two quantifications are proposed, which give a good idea of this quality.

Once all that is done, the formula plus the result of quality tests are used to estimate the cost of a new object belonging to the same product family. A short discussion precedes the computation, in order to make the reader aware of the logic behind the use of the formula in the forecasting process: this is not immediately obvious, but must be understood in order to properly use the technique.

This chapter concludes by reminding the most important points which were mentioned in this introduction.

Let us assume, it is a pure exercise, that your company would like to know how expensive it could be to buy a commercial aircrafts defined by its capacity in terms of number of seats and range.You have one hour to give an answer....


Product Family Selling Price Unit Price Commercial Aircrafts Large Aircrafts 
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© Springer-Verlag London Limited 2006

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