Don’t bankrupt your suppliers – get Design Engineers involved.
August 4th, 2010
Cost Out, Cost Down, Cost Reduction, Should Costing – you’ve heard about these programs. But they’re not what they seem. Under the guise of reducing product costs they steal profit margin from suppliers. The customer company increases quarterly profits while the supplier company loses profits and goes bankrupt. I don’t like this. Not only is this irresponsible behavior, it’s bad business. The savings are less than the cost of qualifying a new supplier. Shortsighted. Stupid.
The real way to do it is to design out product cost, to reduce the cost signature. Margin is created and shared with suppliers. Suppliers make more money when it’s done right. That’s right, I said more money. More dollars per part, and not more from the promise of increased sales. (Suppliers know that’s bullshit just as well as you, and you lose credibility when you use that line.) The Design Engineering community are the only folks that can pull this off.
Only the Design Engineers can eliminate features that create cost while retaining features that control function. More function, less cost. More margin for all. The trick: how to get Design Engineers involved.
There is a belief that Design Engineers want nothing to do with cost. Not true. Design Engineers would love to design out cost, but our organization doesn’t let us, nor do they expect us to. Too busy; too many products to launch; designing out cost takes too long. Too busy to save 25% of your material cost? Really? Run the numbers – material cost times volume times 25%. Takes too long? No, it’s actually faster. Manufacturing issues are designed out so the product hits the floor in full stride so Design Engineers can actually move onto designing the next product. (No one believes this.)
Truth is Design Engineers would love to design products with low cost signatures, but we don’t know how. It’s not that it’s difficult, it’s that no one ever taught us. What the Design Engineers need is an investment in the four Ts – tools, training, time, and a teacher.
Run the numbers. It’s worth the investment.
Material cost x Volume x 25%
Posted in Cost Savings, Culture, Design Engineers, How To, Product Development | 
Tags: Cost Savings, Engineering Mindset, Product Design
3 Responses to “Don’t bankrupt your suppliers – get Design Engineers involved.”
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Mike Shipulski
Well written and well said. Very, very hard to get non-engineers to understand this. Non-engineers see a 3D Model spinning around your screen or a 2D drawing sitting on the conference room table and can’t tell the difference between this revision and the last and the one before that….. so the conclusion is that there is no difference, that the important thing is to get into tooling as fast as possible and work through the problems…. because there are always big problems and big changes at the end of the tooling phase anyway, right? (Wrong!)
I’ve tried for over 15 years to explain that to all different kinds of people; the engineers get it, the manufacturers get it….. no one else does.
What a great insight.
We think of cost reductions as just trying to shave material out of a design, or buying cheaper plastic. But there is a huge return on investment in design. Even with an existing design, changes and updates can be leveraged to also include huge cost reductions.
To illustrate, I will read a line from the very top of my “Summary” in LinkedIn:
NEUROSTIMULATOR REDESIGN SAVED $38,000 PER YEAR, INCLUDING $21,400 A YEAR IN ASSEMBLY COSTS
This is a real example from my work experience. One day I got a call asking for me to check out a technical problem with some of our implantable neurostimulators. The problem was a big deal because it took battery life from years to weeks — bad news if the patient has to have an operation because the batteries are dead.
I had to buy a new injection molding tool, which was going to cost about $13,000. While I was “in there”, I took a good look at the design. I asked my manager for a week and a half, because I thought that I might be able to do something with the design. I found that there were tons of things that I could do to make the design work better.
I was able to pull $38,000 of costs out of this fairly low-volume product, and — here’s the important part — most of the money saved was NOT in material usage. OVER $21,000 OF THE $35,000 SAVED WAS IN ASSEMBLY COSTS.
I see this pattern repeated almost as often as I design anything. It is just easier to document when you are working on a product that is already in production. And this medical device was not a particularly poor design.
So how does a designer acquire the skills necessary to do this kind of work? Two routes come to mind:
(1.) Some graduate schools are offering Masters Degrees in something called “Integrated Product Design”, which shows some promise of at least bringing some intellectual organization to those who want to become skilled in Design for Manufacture.
(2.) Or, you can do what I did: Work for 10 years as a Manufacturing Engineer, a Process Engineer, and a Quality Engineer.
I have been designing for medical device companies for 10 years and also consult on a variety of noncompeting industrial designs, and the Manufacturing, Process, and Quality Engineering experience has made all the difference in my work.
Mkie: Very nice take on cost outs and design.
On design I will say, non design cost out is incremental and design cost outs are perceived as quantum leap. While design cost out may be easy for engineers and natural to them, it’s really not natural for every one else.
More importantly, integration of design with user is the key for any product to sustain, if the integration is not without friction its replaceable.
On market place, generally employee paycheck accounts for visible near term past performance. Unless some one is following ones passion the market place will be littered with design that could be more functional, more aligned with user, and less in overall cost.
Let the market place decide. Non design cost out will hit the limit soon and design cost out will come into focus then. Or they will coexist in interesting dynamics.