Shipulski On Design

Archive for the ‘Cost Savings’ Category

What if you could double your factory throughput without adding people?

What if you could reduce your product costs by 50%?

How much money would you make?

How many jobs would you create?

Why aren’t you doing it?

What are you afraid of?

The notion of a unifying theory is tantalizing – one idea that cuts across everything. Though there isn’t one in manufacturing, I think there’s something close: Design simplification through part count reduction. It cuts across everything – across-the-board simplification. It makes everything better. Take a look how even HR is simplified.

HR takes care of the people side of the business and fewer parts means fewer people – fewer manufacturing people to make the product, fewer people to maintain smaller factories, fewer people to maintain fewer machine tools, fewer resources to move fewer parts, fewer folks to develop and manage fewer suppliers, fewer quality professionals to check the fewer parts and create fewer quality plans, fewer people to create manufacturing documentation, fewer coordinators to process fewer engineering changes, fewer RMA technicians to handle fewer returned parts, fewer field service technicians to service more reliable products, fewer design engineers to design fewer parts, few reliability engineers to test fewer parts, fewer accountants to account for fewer line items, fewer managers to manage fewer people.

Before I catch hell for the fewer-people-across-the-board language, product simplification is not about reducing people. (Fewer, fewer, fewer was just a good way to make a point.) In fact, design simplification is a growth strategy – more output with the people you have, which creates a lower cost structure, more profits, and new hires.

A unifying theory? Really? Product simplification?

Your products fundamentally shape your organization. Don’t believe me? Take a look at your businesses – you’ll see your product families in your org structure. Take look at your teams – you’ll see your BOM structure in your org structure. Simplify your product to simplify your company across-the-board. Strange, but true. Give it a try. I dare you.

Some sobering facts: (figure and facts from Matt Slaughter)

• During the Great Recession, US job loss (peak to trough) was 8.4 million payroll jobs were lost (6.1%) and 8.5 million private-sector jobs (7.3%).
• In Sept. 2010 there were 108 million U.S. private-sector payroll jobs, about the same as in March 1999.
• It took 48 months to regain the lost 2.0% of jobs in the 2001 recession. At that rate, the U.S. would again reach 12/07 total payroll jobs around January 2020.

The US has a big problem. And I sure as hell hope we are willing do the hard work and make the hard sacrifices to turn things around.

To me it’s all about jobs.  To create jobs, real jobs, the US has got to become a more affordable place to invent, design, and manufacture products. Certainly modified tax policies will help and so will trade agreements to make it easier for smaller companies to export products. But those will take too long. We need something now.

To start, we need affordability through productivity. But not the traditional making stuff productivity, we need inventing and designing productivity.

Here’s the recipe: Invent technology in-country, design and develop desirable products in-country (products that offer real value, products that do something different, products that folks want to buy), make the products in-country, and sell them outside the country. It’s that straightforward.

To me invention/innovation is all about solving technical problems.  Solving them more productively creates much needed invention/innovation productivity. The result: more affordable invention/innovation.

To me design productivity is all about reducing product complexity through part count reduction. For the same engineering hours, there are few things to design, fewer things to analyze, fewer to transition to manufacturing. The result: more affordable design.

Though important, we can’t wait for new legislation and trade agreements.  To make ourselves  more affordable we need to increase productivity of our invention/innovation and design engines while we work on the longer term stuff.

If you’re an engineering leader who wants more about invention/innovation and or design productivity, send me an email at

mike@shipulski.com

and use the subject line to let me know which you’re interested in. (Your contact information will remain confidential and won’t be shared with anyone.  Ever.)

Together we can turn around the country’s economy.

The DoD wants to save money, but they can’t do it alone. But can they possibly succeed? Do they have fighting a chance? Can they get it done? Wrong pronouns.

Can we possibly succeed?

Do we have a fighting chance?

Can we get it done?

In difficult times it’s easy to be critical of  others, to make excuses, to look outside. (They, they, they.) In difficult times it’s hard find the level 5 courage to be critical ourselves, to take responsibility, to look inside. (We, we, we.) But we must look inside because that’s where the answer is. We know our work best; we’re the only ones who can reinvent our work; we’re the ones who can save money; we’re responsible.

Changing our actions, our work, is scary, but that’s what the DoD is asking for; we must overcome our fear. But to overcome it we must acknowledge it, see it as it is, and work through it.

Here’s the DoD’s challenge: “Contractors – provide us more affordable systems.” There are two ways we can respond.

The fear-based response (the they response): The DoD won’t accept the changes. In fact, they’ve never liked change. They’ll say no to any changes. They always have.

The seeing things as they are response (the we response): We must try, since not trying is the only way to guarantee failure. Things are different now. Change is acceptable. However, the facts are we don’t know what changes to propose, we don’t know what creates cost, and we don’t know how to design low cost, low complexity systems. We were never taught. We need to develop our capability if we’re to be successful.

The they response: Their MIL specs dictate the design and they won’t budge on them. They’ll say no to any changes.  They always have.

The we response: We must try, since not trying is the only way to guarantee failure. Things are different now. Change is acceptable. However, the facts are we don’t know why we designed it that way, we don’t know all that much about the design, we don’t know what creates cost, and we don’t know how to design low cost, low complexity systems. We were never taught. We need to develop our capability if we’re to be successful.

The they response: All they care about is performance. They are driving the complexity. And when push comes to shove, they don’t care about cost. They’ll say no to any changes. They always have.

The we response: We must try, since not trying is the only way to guarantee failure. Things are different now. Change is acceptable. However, the facts are we don’t know what truly controls performance, we don’t know what we can change, we don’t know the sensitivities, we don’t know what creates cost, and we don’t know how to design low cost, low complexity systems. We were never taught. We need to develop our capability if we’re to be successful.

The DoD has courageously told us they want to overcome their fear. Let’s follow their lead and overcome ours.  It will be good for everyone.

The chase for low cost labor is still alive and well. And it’s still a mistake. Low cost labor is fleeting. Open a plant in a low cost country and capitalism takes immediate hold. Workers see others getting rich off their hard work and demand to be compensated. It’s an inevitable death spiral to a living wage. Time to find the next low cost country.

The truth is labor costs are an extremely small portion of product cost. (The major cost, by far, is the material and the associated costs of moving it around the planet and managing its movement.) And when design engineers actively design out labor costs (50% reductions are commonplace) it becomes so small it should be ignored altogether. That’s right – ignored. No labor costs. Free labor. What would you do if labor was free?

Eliminate labor costs from the equation and it’s clear what to do. Make it where you can achieve the highest product quality, make it where you can run the smallest batches, and make it where you sell it. Design out labor and you’re on your way.

Design engineers are the key. Only they can design out labor. Management can’t do it without engineers, but engineers can do it without management.

A call to arms for design engineers: organize yourselves, design out labor, and force your company to do the right thing. Your kids and your economy will thank you.

A recent article written by Leslie Gordon of Machine Design.

You have probably seen it yourself: images of Chinese workers toiling in mud-floored factories, each feeding a separate punch press, as if part and parcel of a living, progressive die. The lure of this cheap labor has sent many U.S. manufacturers scrambling overseas to cut production costs.

Although design-for-manufacturing tools that would have made this exodus unnecessary have been around for more than 20 years, companies continue to overlook them, says Mike Shipulski, chief engineer of plasma-cutter manufacturer Hypertherm, hypertherm.com, Hanover, N.H. “Companies are sticking their heads in the sand. Many U.S. firms have become too entrenched in doing things the same way. For example, a typical product-cost breakdown shows material to be the largest cost at about 72%. Overhead is around 24% and labor is only about 4%. The question becomes, why continue to move manufacturing to so-called ‘low-cost countries’ to chase 50% labor reductions for a whopping 2% cost reduction? And it’s sillier than that because companies don’t account for cost increases in shipping and quality control.”

The problem is that companies neglect to efficiently account for cost during the design side of product development….

Click for the rest of the article

In sourcing, out sourcing, off shoring, on shoring – the manufacturing debate rages. So what’s the big deal? Jobs – the foundation of an economy. Jobs pay for things, important things like food, schools, and healthcare. No jobs, no economy. The end.

What does lean, the most successful manufacturing business methodology, have to say about all this? Lean’s fundamental:

a

Make it where you sell it

a

because the shortest supply chains are least wasteful. Dig the ore in-country, make the steel in-country, forge it, machine it, and sell it in-country. With, of course, some qualifiers, some important ifs:

• If in-country demand is high enough to warrant the investment
• If your company is big enough to pull it off
• If quality can be assured.

All good, but I’m discouraged by what lean does not say:

• Regardless of the country, engage the design community to reduce material cost and waste
• Regardless of the factory, engage design community to make your factory output like two
• Regardless of the industry, engage design community to reduce part count.

We all agree the design community has the biggest influence on cost and waste, yet they’re not part of the lean equation. That’s wasteful. That violates a fundamental. That makes me sad.

Let’s put aside our where-to-make-it arguments for a bit, and, wherever you make product,

a

Engage the design community in lean.

Your purchasing manager was just fired due to skyrocketing shipping costs now that you build product in a country with low cost labor.

You must hold a national press conference to explain how lead paint was put on your product by your supplier in a country with low cost labor.

You get up at 3:00 a.m. (for the fourth night in a row) to talk about a quality problem with a factory in a country with low cost labor.

You must cancel your lean projects because all your black belts are still solving quality problems in a country with low cost labor.

Though you have many half empty factories in your home country, you have a plan to build a new one in country with low cost labor.

Your best manufacturing leader just quit (via text message) because she wants to live with her family and not in a country with low cost labor.

Your purchasing manager’s brand new replacement was just fired because inventory carrying costs are through the roof now that you build product in a country with low cost labor.

You must find a landfill to bury three months of bad product now on a slow boat from a country with low cost labor.

Your new product launch is delayed because you have to tear down the machines and move them to a country with low cost labor.

The financial types that run your company are too far removed from the work so their only trick is to move it to a country with low cost labor.

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%

I read a refreshing article in the Washington Post. Defense Secretary Robert M. Gates wants to save $20B per year on the Pentagon’s spend. I could kiss this guy!

Gates wants contracts scrutinized more closely for inefficiencies and unneeded overhead. He said the savings could be shifted to support U.S. troops around the globe. Pentagon officials said they’re looking for annual savings in the $400 billion spent on goods and services. They’re looking to save $20B, or 5%.

Gates has it right. The government must stop overpaying. But how? Gates suggests improved contract scrutiny to eliminate inefficiencies and unneeded overhead. He’s on the right track, but that’s not where the money is. Gates’ real target should be material cost – that’s where the money is. But, can material cost bring $20B savings? Yes.

Assume the Pentagon spends $100B on services and $300B on goods. The cost of those of goods falls into three buckets: labor, material, and overhead, where material cost makes up the lion’s share at 70%, or $210B. A 10% reduction in material cost brings $21B in savings, and gets Gates to his target. But how?

To get the savings, the Pentagon must drive the right behavior.  They must must make suppliers submit a “should cost” with all proposals. The should cost is an estimated cost based on part geometries, materials, manufacturing processes used to create the parts, prevailing wage rates and machine rates, and profit. From these parameters, a should cost can be created in the design phase, without actually making the parts. So, the Pentagon will know what they should pay before the product is made. This cost analysis is based on real data, real machines, and real material costs.  There is no escape for defense contractors.  The cash cow is no longer.

Should costing will drive the design engineers to create designs that work better and cost less, something the defense industry thinks is impossible. They’re wrong. Given the tools, time, and training, the defense industry’s design engineering community can design out at least 25% of material cost, resulting in $50B+ in savings, more than twice Gates’ goal. Someone just has to teach them how.

Mr. Secretary, the non-defense world is ready to help.  Just ask us. (But we’ll go after a 50% cost reduction.)

Design for Manufacture and Assembly is reported to improve CNC performance, modularity, durability, and serviceability

When Hypertherm (www.hypertherm.com) was getting ready to design its next generation of metal cutting CNCs, the engineering team’s goal was to make improvements. But the controllers, which automate the Hanover, New Hampshire-based company’s advanced cutting tools and systems, were already well-accepted in the marketplace and highly regarded in the industry. So why redesign? And how would they go about it?

See this link for the full article – Using DFMA to Control Controller Design