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Speaker of Verhaert at the 9th edition of our Innovation Day on October 26th 2012.
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CONFIDENTIAL
26.10.2012 Slide 1
CONFIDENTIAL
COST REDUCTION
Ann Van Mele
Business Development Key Accounts
CONFIDENTIAL
26.10.2012 Slide 2
Cost Reduction
Agenda
• Introduction
• Drivers?
• Where?
• Cost reduction program
• Cost Planning
• What?
• Why?
• How?
• Cost estimation Top-down
• Cost estimation Bottom-up
• Cost Reduction Approaches
• Value Eng.
• Portfolio rationalisation
• DUE
• Design for manufacuring
• Conclusion
Slide 3 26.10.2012
CONFIDENTIAL
Introduction - Drivers
• Globalisation
• Low-cost country production
• More important for mature products
• Increased product changes - Product differentiation
Slide 4 26.10.2012
CONFIDENTIAL
Introduction – Where?
Number of uncertanties
Intended level of learning Cost of
changes
Uncontrolled learning
Progress in development
NPI NPD Front end
Fundamental cost
reduction
Why most corporate
actions lead to marginal
cost reduction?
Slide 5 26.10.2012
CONFIDENTIAL
Introduction – Where?
Product cost
Slide 6 26.10.2012
CONFIDENTIAL
3 fold engagement
Perfor-mance
Planning
Risk manage
ment
Price
Introduction - Cost Reduction Program
Slide 7 26.10.2012
CONFIDENTIAL
Introduction - Cost Reduction Program
Detailed concepts
Product concept
System concept
Strategic architecture
Cost pla
nnin
g
Requirement setting
Benchmarking
Re- engineering
Strategic architecture
System concept
Product concept
Detailed concepts
Cost pla
nnin
g
Requirement setting
Benchmarking
New Product
Slide 8 26.10.2012
CONFIDENTIAL
Cost Reduction Program
Strategy Positioning
Tactical Architecture & system
Operational Detailed concepts
Business
Technical
Value
Eng.
Discount Usability Eng.
Portfolio Rationalisation
Design for manufacturing
Slide 9 26.10.2012
CONFIDENTIAL
Cost Planning
Slide 10 26.10.2012
CONFIDENTIAL
Cost Planning - What?
“You can’t manage what you don’t measure” Ed. Deming
Slide 11 26.10.2012
CONFIDENTIAL
Cost Planning - Why?
• By the end of the concept phase 60% of total cost is fixed
• To know the cost drivers
• To set the right priorities
• Highest freedom to find alternatives
• Quantify the consequences of design decisions
Slide 12 26.10.2012
CONFIDENTIAL
Cost Estimation - Top Down
Target Costing
• From the market (set objective)
• Market research
• Margin structure
• Competition
• Translate to technical cost price
• Monitor the target cost during the development trajectory
Slide 13 26.10.2012
CONFIDENTIAL
Cost Estimation – Bottom up
Slide 14 26.10.2012
CONFIDENTIAL
Design
freedom
Cost Estimation – Bottom up
Need to estimate the product cost in an early stage
knowledge
Development cycle
No data available
Slide 15 26.10.2012
CONFIDENTIAL
Cost Estimation – How?
Function tree
• E.g. Design Function Deployment
• Excel sheet
Slide 16 26.10.2012
CONFIDENTIAL
Cost Estimation – How?
• Generative method (production process & material)
• Estimate amount of material & manufacture time
• Parametrical method (simulation models)
• Relations between different design parameters- related costs
• Data verification of previous development processes
• Variant based method
• Find similarity between new and existing product
• Hybrid method (combination)
• Standard components (generative, variant-based)
• Innovative components (parametric)
• …
Slide 17 26.10.2012
CONFIDENTIAL
Cost reduction in the development process
Approaches
Slide 18 26.10.2012
CONFIDENTIAL
Design for manufacturing
Cost Reduction Program
Strategy Positioning
Tactical Architecture & system
Operational Detailed concepts
Business
Technical
Value
Eng.
Discount Usability Eng.
Portfolio Rationalisation
Slide 19 26.10.2012
CONFIDENTIAL
1 .Value Engineering
Cost Reduction by evaluation function/user value
• Function analysis
• Functionality & Physical process
• Function/value for user
• Creative phase
• Idea generation- alternatives
• Evaluation phase structured evaluation process
• Cost price verification process
• Development phase (concept)
• New-value proposition
Slide 20 26.10.2012
CONFIDENTIAL
Cost Reduction Program
Strategy Positioning
Tactical Architecture & system
Operational Detailed concepts
Business
Technical
Value
Eng.
Discount Usability Eng.
Portfolio Rationalisation
Design for manufacturing
Slide 21 26.10.2012
CONFIDENTIAL
2. Portfolio Rationalisation
What?
• Contribution analysis
• Segmentation
• Feature rationalizing
• Cost reducing architectures
Platform integration Modular design (plug & play)
Slide 22 26.10.2012
CONFIDENTIAL
Cost Reduction Program
Strategy Positioning
Tactical Architecture & system
Operational Detailed concepts
Business
Technical
Value
Eng.
Discount Usability Eng.
Portfolio Rationalisation
Design for manufacturing
Slide 23 26.10.2012
CONFIDENTIAL
3. Discount Usability Engineering (DUE)
Cost Reduction by Disruptive concepts
• Identifying over served market segments
• Product stripping
Disruptive technologies evaluation
• Technology scouting
• Technology evaluation
• Preliminary system concepts
Perf
orm
ance
incremental
incremental
Just good enough
Competition to non consumption
incremental
Source: Based on Christensen
Slide 24 26.10.2012
CONFIDENTIAL
Cost Reduction Program
Strategy Positioning
Tactical Architecture & system
Operational Detailed concepts
Business
Technical
Value
Eng.
Discount Usability Eng.
Portfolio Rationalisation
Design for manufacturing
Slide 25 26.10.2012
CONFIDENTIAL
4. Design for Manufacturing
Economy of scale:
• Smart definition of modular architectures can have a huge impact on
the economy of scale on component level.
• Working with standardized components can reduce your
development cost , and will increase your time to market.
Material type
• Choose material which is easy to fabricate
• Manufacturing techniques
Material form
• Size and shape of component determines the form & cost (bar,
plate)
Material volume
• Material reduction by (FEM modelling,..)
Slide 26 26.10.2012
CONFIDENTIAL
4. Design for Manufacturing
Tolerances
• Geometric tolerances (tighter more expensive)
• Capacity tolerances (e.g. battery, processing unit,…)
Design & shape
The shape and volume of your component will determine the machine time
• Time to install & remove material
• Tooling
• Shape (radii or chamfers,…)
Design for Maintenance
• Life cycle
• Accessability
• Corrective/preventive
Slide 27 26.10.2012
CONFIDENTIAL
Design for Assembly
• Reduction of parts e.g. dual use major cost benefit
• Provide features to easy grap, insert, move, orient
• In-mold assembly
• Reduce complexity
Design for Testing
• Sub-assemblies testing
• Add certain testability features
Sourcing
• Evaluate Suppliers
• Evaluate outsourcing of production
• Second sourcing
4. Design for Manufacturing
Slide 28 26.10.2012
CONFIDENTIAL
Conclusion - Cost Reduction Program
• User centered – Value driven
• Cost planning
• Be aware of the insidious character of cost drivers
Slide 29 26.10.2012
CONFIDENTIAL
VERHAERT MASTERS IN INNOVATION® Headquarters
Hogenakkerhoekstraat 21
9150 Kruibeke (B)
tel +32 (0)3 250 19 00
fax +32 (0)3 254 10 08
More at www.verhaert.com
VERHAERT MASTERS IN INNOVATION® Netherlands
European Space Innovation Centre
Kapteynstraat 1
2201 BB Noordwijk (NL)
Tel: +31 (0)633 666 828
More at www.verhaert.com
VERHAERT MASTERS IN INNOVATION® helps companies and governments to innovate.
We design products and systems for organizations looking for new ways to provide value
for their customers.
We are a leading integrated product innovation center; creating technology platforms,
developing new products and business in parallel, hence facilitating new-growth strategies
for our clients.
