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Publication Date: 02/1/2009
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Eight Ways to Reduce Product Costs

While severe economic pressures can result in budget cutbacks and personnel layoffs, these changes fail to produce the organizational, process or product improvements that are necessary for gaining a competitive advantage. Far too often, they may turn out to be inhibitors of change. In his study of the obstructions that inhibit the flow of knowledge in an organization, Joseph Kasten of Dowling College, Oakdale, NY, calls them "rocks in the stream". There are plenty of "rocks in the stream" when it comes to meeting the challenge of reducing costs in the product development and engineering cycle. In spite of mandates from management to cut expenses and speed up the development process, there are inhibitors or barriers to success.

At the same time, there are useful "tools" available for helping to remove the "rocks in the stream." Here are eight:

1. Reduce complexity. It may be that unnecessary complexity is a primary cost driver when it comes to product development. In many companies, for example, products and product lines develop independently of each other, with engineers focusing on the task at hand.

When business is good and everyone is busy, there is little time to go back through previous projects to see if any existing components match the requirements of the new product. It's like going to the supermarket each week without a shopping list and before you know it, you have ten cans of various types of vegetable soup. In the same way, a company may find that it has designed 14, 14-1/2 and 15-in. hinges and an engineer is about to specify one that's 14-3/4-in., even though the door size is nearly the same in each case and any one of these hinges will do the job. Unfortunately, engineers don't have easy access to or knowledge of products developed in the past, other than to try to find someone who may recall working on a similar project.

Slower periods are an opportunity to deploy engineers to work on the complexity problem by creating "a virtual parts bin" which can give members of the engineering team access to the company's engineering legacy.

This makes it possible to go back and not only uncover redundancy, but to also use their time to improve the company's products by reducing weight and volume or introduce alternative materials that may not have been available when the product was initially designed. With a "virtual parts bin," both the development/engineering cycle and costs can be reduced. Companies under pressure have been doing it for a long time. Studebaker Corporation, a long defunct automotive manufacturer, was faced with reducing product complexity to save money in its pickup truck line from 1941-1947. The engineers came up with the innovative solution of using the same fenders on the front and rear, while the dashboards, cowls, windshields and front bumpers came from one of its sedan lines.

It's always beneficial to remember that reducing complexity can save money not only in new products but often retroactively in current products.

2. Reduce prototype development time. Without question, time is an overriding enemy when it comes to getting a product to market. More often than not, the "rock in the stream" is the time required to build mock-ups.

Although putting 3-D digital prototyping technology to work has a multitude of advantages, ranging from lowering costs, speeding up the prototyping process and fostering innovation, there are engineers who continue to rely on creating physical prototypes. Unfortunately, the process creates bottlenecks, so engineers find themselves waiting around until the next prototype is finished. The costs are simply too high, both in time and money, for this to occur today.

With the absolute requirements of maximum efficiency, lowest possible costs and getting to market in record time, management can help overcome engineering department reluctance by taking two steps: make a commitment to move to digital prototyping, and follow up by investing in the technology and training that makes the transition successful. Key elements in using virtual prototyping for effectiveness: ensuring that design reviews happen digitally and that all involved stakeholders learn to think "digitally" (making key decisions using only the digital prototype).

3. Use more technology. Along with prototype building, technology offers other benefits. For example, it allows designers and engineers to work as teams, interacting quickly, whether they are in the same location or dispersed. Not only does this approach save valuable time, but the collaboration also allows them to achieve the best possible solution.

Technology can also speed up what has long been the time-consuming, tedious and costly sign off process. There is no reason to distribute physical sets of drawings, when it can be done digitally. Changes and comments can be noted electronically and redistributed, if necessary, to say nothing of identifying any stragglers who have yet to respond. New technology is always easier to deploy when the organization is not running at full-speed. Many successful companies have used downturns to their advantage by choosing to introduce new technologies and processes when the going is slow.

4. Make better use of suppliers. It's critical that suppliers be part of the team at the start of a project. The results can be positive when this occurs. For example, an automotive OEM saved $12 million a year on the cost of key fobs by listening to its parts supplier, who pointed out that the company was using seven different key fobs across nine vehicle lines. By using one basic design with slight variations, the savings would be significant. As it turned out, this particular supplier had volunteered the suggestion on several occasions, but no one picked up on it. By involving suppliers from the beginning, they can make significant contributions as unpaid "consultants."

5. Listen to the people on the line. Those assembling a product, whether it's a vehicle, a grill or a computer, may be the engineers' most useful resource. Unfortunately, they receive too little attention and recognition. It should not be surprising that they often feel inadequate when asked for suggestions. All of which demands a culture change, since their input can be of tremendous value in avoiding problems and improving a product.

A boat manufacturer discovered first-hand the difference assembly line workers can make. While an engineer was reviewing the assembly process, a worker pointed out that the exhaust pipe didn't quite line up with the hole in the hull because of the way the engine had to be mounted. This not only placed unnecessary stress on the entire exhaust system, but it also required approximately 45 minutes of extra installation time. By simply specifying that the hole be moved about one inch, both problems were solved.

Every manufacturer can benefit from a Manufacturing Feedback Group that includes assembly line personnel as well as others involved in the production process.

6. Think like a customer when it comes to features. It's easy to forget that the task is satisfying customers, not the engineers or designers. It's only necessary to point to the 2001 introduction of BMW's iDrive to understand the problem. It has been described as "the biggest corporate disaster since Coca-Cola Co. decided to tinker with the formula for its eponymous beverage." It first appeared on the BMW 7 Series, and although it was a brilliant design and engineering feat, customers found the iDrive complicated, confounding and frustrating.

Although it has been simplified and improved, many customers still don't want anything to do with it, including the owner of a 2007 X5 who, after having the car for two weeks, commented, "The iDrive is surely annoying and unreasonably complex." Without question, this is a prime example of a product that was designed by engineers, for engineers.

It doesn't need to happen. Apple, Inc. understood that most cell phone users hated their phones for the same reasons that plagued the iDrive. While cell phones are technological marvels, they are essentially user-unfriendly. The intuitive iPhone avoided the iDrive error and quickly became an unparalleled success.

7. Design for cost savings, but don't sacrifice testing and verification. It's only necessary to point to huge product recalls, as well as spec changes on certain parts soon after a product has been introduced, to validate this issue. Whether the problem is caused by the need to meet an introduction deadline or to abide by an ultimatum to reduce overall development costs, the result can be a costly disaster.

For example, purchasing brought a new windshield adhesive to the engineers' attention that offered a 25 percent savings over the product being used currently. Because of the cost differential, purchasing urged that the specs be changed immediately.

The engineers balked, indicating that the new product required testing to assure long-term performance under a variety of demanding conditions. If the new adhesive failed, the cost of replacing and resealing the windshields in the field would be exorbitant. Failing to verify performance is always unacceptable.

8. Create and rationalize specifications. If this seems painfully obvious, then why are there so many exceptions, and costly mistakes? If, for one reason or another, a supplier happens to change specifications, how can they be held responsible if there were no approved specs?

Beyond that, manufacturers need to have specs for all their products. It's no accident or plain luck that the design and specifications for all BMW brakes (considered one of the most confidence-inspiring designs under driving conditions) are the same. The only difference is in the size.

Finally, having complete specifications facilitates the bidding process and results in better pricing and product quality. In effect, a company's product specs are its tool for eliminating redundancy, saving time, eliminating errors and obtaining cost advantages.

Avoiding these "rocks in the stream" is a manufacturer's best guarantee for staying competitive or gaining a valuable competitive advantage in any economic environment including very difficult times.

Contact: Optimal Manufacturing Engineering, Inc., Orlando, FL 407-965-5011 E-mail: Web:

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