Prerequisite for Designing for
Manufacturability and Low Cost:
Remove Counter-productive Policies
Cost Reduction Strategy (home page)
Half of change is undoing counter-productive
Half the challenge to implement new methodologies may be getting rid of existing
counterproductive policies. For product development, here are some of the worst:
Don’t bite off more than Engineering can chew when planning product
portfolios, which drastically decreases the success rate of all products.
The book, Fast Innovation, (by Michael L. George, et al., 2005,
McGraw-Hill; p. 167) presents a case study which clearly shows how
too many projects diminish the chances of project success.
In the first, year a prominent company tried to
develop 120 products, but resources were spread so thin that no products
were introduced at all! The next year the workload was
reduced to 22 projects and they were able to introduce eight products in 24
to 28 months. In the next year, as they got more focused on only 20 projects,
they were able to launch 14 products in 12 months. Thus
able to successfully launch almost twice as many products in half the time!
The results of focusing product development and
rationalizing away most existing products during a three year period was
that manufacturing productivity tripled, early life failures decreased by 38 times,
customer satisfaction rose from 27% to 90%, revenue increased by 2.4 times, and
operational earnings increased from -6% to +7%.
Don’t allow Sales to “take all orders” and “acceptall customizations”
(or, worse, encourage them) and
pollute operations with low-volume, hard-to-build products that drain resources
away from product development and other improvement programs.
Rationalize Product Lines to eliminate or
outsource high-overhead products.
Don’t “manage” product development with deadline management (track
progress meeting deadlines and then putting on the pressure if any deadline is
late) for the illusion of “early progress.” This can counterproductive if
poorly set deadlines don’t encourage thorough up-front work.
Be very sure that your your product development process
actually has a product design phase:
Some, even prominent and expensive "processes" don't, and
skip skip from the "concept testing" phase to
the "prototype testing." phase. Check your to see
if it has a strong product design phase, or has one at all!
Don’t quantify only labor and part cost and then allocate (average) all
other costs (overhead) over all products, good or bad. Instead
quantify total cost.
remove cost after the product
is designed, which is so hard to do that is a waste of resources.
Reasons Why “Cost Reduction” after Design Doesn’t Work.
Don’t go for the
low bidder on custom
parts, which precludes
and, thus, prevents those vendors from helping the company design the parts
and their tooling.
Companies that practice the above three will have to devote a
very high percentage of product development resources of their time to: make change orders to try to implement DFM (because it couldn’t be done with
Concurrent Engineering); try to take cost out after the product is
designed with change orders;
offshore manufacturing to "save cost,"
which makes it hard to do Concurrent Engineering when there are no manufacturing
people around to be “concurrent” with. In many offshoring situations, people in
engineering and manufacturing are not even working at the same time. So
launching a product stares with throwing a drawing package "over the ocean,"
which is followed by the Contract Manufacturer "building to print," whether
the drawings are perfect, 100% complete, and completely unambiguous -- or
not, which is the case in almost all offshoring.
Outsourcing, in general, also involves
converting documentation for outsourcing; changing all parts to "local
sources of supply; getting outsourcers up to speed; dealing with quality and delivery problems, and so forth and so on.
In his travels, the author of this site,
Dr. David M.
Anderson, has encountered several companies that spend two-thirds of
product development resources on the last three bullets, which really
puts their future in doubt if that future depends on new product development.
Ironically, these attempts thwart six of the eight Half-Cost strategies,
for reasons presented at the beginning of the
After DFM training, one large company that has pioneered many of these,
needed to launch an initiative called "DFM vs policy" to correct current
counterproductive policies for their first product development team to utilize
these new methodologies.
Don't make the
definition of product cost overwhelmingly
based on part cost or that will
cause serious problems in quality, product development, and block
improvements in supply chains and lean production, which will then thwart
most of the major cost reductions
in the page on Designing Half Cost Products: affecting the following
Quality. Pressures to lower part cost
results in cheap parts, which will raise
more their anticipated savings, and that will have the following effect on
Product Development. Dealing with
problems caused by cheap parts will:
increase resource demands to deal with quality problems,
introduce many variables, which compromise
functionality, with change orders to make everything work again and fix
new problems caused by all the changes
put pressure on teams to compensate for all the above
delay the time to stable production.
thwarted by pressures to keep part cost down because most standard parts are
“better” than a proliferation of the minimum spec parts, but the overall
gain from standardization would be so great the material overhead four
standard parts could be discounted to 1/10 of hard-to-get parts (see the
first page of Chapter 4 on Standardization in the
Part availability improvements will be
also thwarted because more available parts may raise a BOM (Bill Of
Material) entry, but the overall cost savings will be enormous by avoiding
the cost of obsolescence and
supply chain spontaneity which is a key prerequisite to Lean Production.
Off-the-shelf parts, which can focus
resources on what customers buy products for and lower overall cost, but
this will be discouraged by BOM cost pressures because purchased part cost is
the total cost , whereas BOM cost is only material cost. For instance, wires
are very inexpensive (as they may be “expensed” and not even be listed on
the BOM) but wiring generates enormous labor and quality costs to wire
products "like a house." However, DFM solution to wiring problems and cost
is standard off-the-shelf cables, which will all look like “new expenses”“
on the BOM.
Vendor/Partnerships can reduce
many costs, reduce NPD resources, and reduce the time to stable production.
However, they will not be an option if purchase cost pressures force teams
into the sub-optimal practice of designing in isolation and then going out
for the low bidder.
DFM guidelines, like “Eliminate Right/Left Parts,” symmetrical
parts, and part consolidation will be discouraged if “extra” processing (to
make right and left parts the same) raises a BOM entry. In one company the
VA team resisted the DFM team’s attempts combine eight different brackets
into one by drilling all the holes for all brackets into one versatile
version because it would add extra hole drilling to most of the versions!
However, if the right and left parts were molded or cast parts, eliminating
the extra mold would save tens of thousands of dollars in tooling costs.
One category of concept breakthrough is for electronics, including higher
levels of electronic integration, combining circuit boards, and simplifying
inter-board wiring could be discouraged if (a) the status quo is using
‘free” wires and under-reported assembly labor and quality problems and (b)
the solutions appear as expensive new BOM entries without quantifying all
the cost and throughput benefits.
can easily exceed profits. Without standardization, all delivered parts will
go into “raw materials” inventory, which will then be kitted for each
production batch, thus creating a lot of Work-In-Process inventory, and then
wait as Finished-Goods inventory until shipped. Inventory carrying cost
actually costs a quarter of its value per year (see plot in the
Mass Production article), and can be eliminated by
designing for lean production and build-to-order, which will not be
possible with all the above consequences of defining cost as primarily based
on part cost.
Worst possible scenario:
The worst possible “cost reduction” scenario is to *(a) base “cost” primarily on
parts and (b) pressure the design team for ambitious goals, like half the
(parts) cost. That much pressure on parts cost will lead to desperate searches
for the absolute cheapest cost which will:
- Compromise quality, raise quality
costs, worsen reliability, and all the costs to deal with that,
which will lengthen product development time.
- Thwart all real supply chain and lean production
cost improvements such as standardization, designing for part
availability, and off-the-shelf parts, which will be perceived as “raising”
a BOM entry
- Discourage vendor/partnerships if cost pressures on their parts
drive the counterproductive practice of designin in isolation and send out
for the low-bidder
- Discourage DFM improvements that
combine parts and simplify any designs that may raise a BOM entry.
Ironically even a miraculous alignment of low-hanging fruit
reduces parts cost in half (assuming it isn’t cancelled out by the above), , it
would only cut in half mo more than a tenth of the selling
price, which would only result in 1/20 of the selling price, instead of
one half of selling price as is possible by the techniques at:
Call Dr. Anderson at 1-805-924-0100 to discuss
implementing these techniques or e-mail him at
firstname.lastname@example.org with your
name, title, company, phone, types of products, and needs/opportunities.
Dr. David M. Anderson, P.E., fASME, CMC
Copyright 2018 by David M. Anderson
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