By Dr. David M. Anderson, P.E., fASME, CMC
Stopping counter-productive policies before change can start
For instance, requiring vendors to bid will prevent
The most advanced companies are using
Design for Manufacturability methodologies to develop products that are designed
for manufacturability, cost, quality, and the fastest real time-to-market. The
accomplish this by using Concurrent Engineering to work together in
multifunctional teams to either concurrently design products for existing
processing or concurrently design new processing or tooling. Vendors must be
pre-selected so they will be motivated (and expected) to work early with the
team (see below).
However, what happens when the manufacture is
outsourced to contract manufacturers and job shops? Unfortunately, in most
cases, the part or subassembly (hereafter called part) is designed without any
collaboration with the CM or job shop (hereafter called vendor) and thrown “over
the wall” to the vendor. This at the most reactive end of the Concurrent
Unless the customer’s engineers thoroughly understands the
processes, which is rare, the design will not be optimized for manufacturability
and, worse, it will be hard for the vendor to make changes to make it more
manufacturable because (a) there is usually no calendar time for changes, (b)
there is usually no budget for changes either at the customer or the vendor, and
(c) by this point, most changes can not be attempted because designs have so
much “cast in concrete” (see graph which shows that
80% of cost is committed by the design). Sound familiar?
The solution to this dilemma is vendor/partnerships, in which vendors are early
and active participants on its customer’s product development team to co-develop
(concurrently engineer) the parts they will be building. As part of the team,
vendor can help the team design the parts for the lowest total cost and the
quickest delivery because:
• Vendors thoroughly understand the DFM rules and guidelines for their process,
in general, and for their equipment, in particular.
• Vendors can help avoid arbitrary decisions, which unnecessarily raise cost,
delay delivery, and compromise quality. One of the worst causes of arbitrary
decisions is styling, especially when the designer throws a pretty shape over
the wall to Engineering, which then throws it over another wall to
Manufacturing, who then throws it over yet another wall to the vendor – so the
tool maker is three walls away from the designer!
• Vendor/partners will provide the lowest total cost because interacting with
the customer’s team results in vendors:
• thoroughly understanding the challenges and issues
• making “what if” suggestions early that will maximize manufacturability
• working with customers early to minimize total cost
• Vendor/partnerships benefit from learning relationships
where the customer and vendor learn from each other, thus making each job better
The bottom line is that customers need to pre-select vendors (and renounce
bidding of custom parts if that is in the way) so they will help their teams
develop products, as the following leading companies do:
“Toyota selects suppliers early in the product
development program, guarantees the business, and incorporates them as part
of the extended product development team.”1
“At the formal start of the design concept phase, Philips people
representing all functions involved in design, manufacturing, an supplier
relations, as well as a manufacturing line work and a buyer, meet with their
counterparts from the suppliers.” 2
At Motorola, bringing in vendors into the team has proven to be a major
contributor to a project’s success.3
Hewlett-Packard’s policy is that vendors should be willing and able to
perform all three of the following roles: (a) help design the product; (b)
build quick-turn prototype parts and parts for short-run projects; and (c)
build production units.4 Companies should avoid changing
vendors as volumes rise because this adds new sources of statistical
variation at the worst time for unexpected problems to occur.
So both customers and vendors should be striving to reap the
benefits of vendor/partnerships and avoid the pitfalls of counterproductive
policies, like bidding, that discourage these relationships.
Of course, it is the customer who needs to initiate vendor/partnerships, but if
this not forthcoming, vendors can do the following:
• Encourage vendor/partnerships. Offer to customers to help them design the
parts that the vendor will be building, in exchange for the business.
• De-emphasize bidding work and institute a preference for working with
customers that are welcome to vendor/partnerships.
• Educate customers using the above points or the books cited and recommend
customers arrange training on Concurrent Engineering, which should also be
attended by key vendors’ representatives.
• Select vendors on the basis of:
• Capabilities, past relationships, and a proven record of performance, not
• Financial stability; get Dunn & Bradstreet or similar reports
• Your business being an important share of theirs, especially if there are any
unusual requirements or variations from typical operating procedures
• Proximity; local vendors are preferred for contact and delivery.
• Similarities and synergies with vendors’ other work, especially with respect
to experience, parts used, fabrication/assembly machinery, and test equipment.
This will minimize learning curves, delays, changeovers, part changes, program
rewriting, and, thus, minimize cost, quality problems, and delivery times.
• Willingness to work early with their customers in the design, help design
their parts and convey their process capabilities and constraints.
• The ability to work well together, contribute ideas, and provide honest,
“Toyota wants the suppliers to think for themselves,
challenge the requirements, and provide value-added ideas to the process.”6
“Teamwork at Motorola is imbedded in the firm’s culture, and this is one
reason for its success with supply alliances.” The teams “focus on quality
(as broadly defined), speed (in terms of removing non-value-added steps),
and cost reduction.”7
Honda’s criterion for selecting suppliers is the attitude of their
management.8 As a philosophy-driven company, Honda feels it
is easier to teach product and process knowledge than to find a
technically-capable supplier with the right attitudes, motivation,
responsiveness, and overall competence.9
• Vendor/partnerships should be developed. Kiichiro Toyoda, founder of Toyota’s
automotive business, said:
“First tier suppliers, in particular, must be partners in
research. We don’t just buy things from them. We have them make things for
WORKING WITH VENDOR/PARTNERS
• Don’t just throw a spec at a vendor and ask for a quote; work with the vendor
to optimize the design for manufacturability. Explore “what if” scenarios.
• Understand the vendor's processes, sensitivities, and process capabilities.
Direct interaction and visits are preferred.
• Vendor/partners should work early with the design team to optimize
• Each vendor should:
• be an early and active participant on the team
• convey its design rules and guidelines
• recommend optimal design practices
• help the team design its part and its tooling
• arrange for its tooling engineers to work directly with design engineers
and industrial designers
• for repeat engagements, present lessons learned for next project
• possibly, design the entire part and tooling under the team’s supervision
• Team members should interact directly with the appropriate
people in the vendor’s factory (being sure to include the team’s purchasing
member) not just through the Procurement Department or through the vendor’s
sales reps, who may not understand your products or even their processing.
• Vendors should be willing and able to do the following (HP’s criteria):
• Help design the product
• Build quick-turn prototype parts and parts for short-run projects
• Build production units
• Don’t change vendors:
• as volumes rise because this adds an additional ramp and
new sources of statistical variation at the worst time for unexpected
problems to occur
• for a “lower cost” on parts because the total cost, including the cost of
the change, will most likely be higher.
• at the first hint of disappointment; work with them to improve
• at all so as to preserve the “learning relationship” in which every job
improves the rapport, cooperation, dialog, and feedback.
• Don’t do anything to diminish vendor/partnerships like
excessive red tape or stretching out their payments “to save cost” or they may
give preference to other customers that pay on time so they may not be there for
you in emergencies.
Actually, this does not save cost – rather it only borrows it from the
time when the companies knows better and reverse the policy.
• Here is how Toyota treats suppliers. A survey of suppliers found that Toyota
is rated by suppliers as “their most demanding customer” but also rated the
highest: 415 out of 500 compared to GM at 114 out of 500. Toyota:
• works with new or struggling suppliers to get up to speed;
• makes commitments to suppliers early in the product development process
and makes good on promises;
• constructs contracts that are simple and for the life of the product;
• is the best at balancing a focus on cost with a focus on quality;
• honors the contracts – does not renege on them;
• treats suppliers respectively and respects the integrity of intellectual
• works with suppliers to achieve price targets.11
PROBLEMS WITH BIDDING CUSTOM PARTS
For those who believe in Concurrent Engineering, this logic should be
compelling. However, many companies have policies that discourage
vendor/partnerships all based on the erroneous belief that they can save money
by sending parts out
for bid, after they are designed, and then selecting the low-bidder.
However, this will not result in the lowest total cost, because:
• Vendors will not help design the part unless paid work will follow. They will
need some assurance that they will get some work before they invest their effort
to help customers design their parts. Thus, bidding misses out in the biggest
opportunity to save cost – working together.
• Low-bidders may not understand the problem or may be cutting corners, which
raises other costs such as quality, expediting, delayed launch, warranty costs,
or the costs of recalls (which have been in the news a lot lately).
• Bidders often add a “cushion” to deal with unknown customers or incomplete
“Suppliers often add a risk premium to their pricing (thus
raising the customer’s cost) to cover nondisclosed or unexplored customer
requirements or design flaws that may require later adjustments.”
• The customer’s purchasing agents will not be able to help the
team develop products, assure availability, and set up vendor/partnerships
because they will be too busy managing running the bidding process. The Toyota
Product Development System book sums up the cost of bidding as follows:
“Searching the globe for the lowest cost means managing
very large numbers of suppliers as well as introducing a steady stream of
new suppliers into your system. These suppliers are unfamiliar with your
requirements and demand a great deal of attention to get up and running.
While administering complex contracts, managing global bidding wars, and
overseeing the constant introduction of new suppliers into the process, U.S.
automakers must maintain mammoth purchasing organization, deal with
incredibly cumbersome and slow sourcing processes, and live with constant
variation of supplier performance in the development process.” - all to
• Finally, it takes a lot resources away from product
development to support bidding (at both the customer and vendor), for instance,
to update/change documentation, CAD files, materials, tooling, and processing;
complete transfers; and deal with new or ongoing problems related to ramps,
delivery, quality, or getting up the learning curve in general. All the above
problems are much worse when offshoring to another continent (see article at
The book that started the lean production movement, "The Machine That Changed
the World," notes that in lean production companies: Suppliers “are not
selected on the basis of bids, but rather on the basis of past relationships and
a proven record of performance.”
Arranging for vendors to help design what they build will save more money than
any “saving” from low
bidding. This will result in: more resources on the design team without
increasing the development budget; quicker part development and less chance of
delays from part design or tooling shortcomings; and fewer team resources wasted
dealing with manufacturability problems that come from less experienced
These are the general principles. Pass
around this article or URL to educate and stimulate interest
In customized seminars and
webinars, these principles are presented in the context of your
company amongst designers implementers, and managers, who can all discuss
feasibility and, at least, explore possible implementation steps
In customized workshops, brainstorming sessions
apply these methodologies to your most relevant products, operations, and supply
If you want to discuss Vendor/Partnerships
by phone ot e-mail, fill out this form:
Call or email
about how these principles can apply to your company:
Dr. David M. Anderson, fASME, P.E., CMC
1. Morgan & Liker, The Toyota Product Development System, p. 193
2. Jordan D. Lewis, The Connected Corporation, How Leading Companies Win
Through Customer-Supplier Alliances, (New York, Free Press, 1995); Chapter
5, “Cooperating for More Value,” p. 92.
3. Kim B. Clark and Takahiro Fujimoto, Product Development Performance
(1991, Harvard Business School Press), p. 349.
4. David M. Anderson, Design for Manufacturability &
Concurrent Engineering; How to Design for Low Cost, Design in High Quality,
Design for Lean Manufacture, and Design Quickly for Fast Production,
(2010, CIM Press)
5. James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine that
Changes the World; The Story of Lean Production, (1990, Harper-Perennial
Division of Harper Collins), Chapter 6, “Coordinating the Supply Chain.”
6. Morgan & Liker, The Toyota Production Development System, p. 185
7. Lewis, The Connected Corporation; Chapter 13, “Successful Alliance
Practitioners,” p. 273.
8. Jeffrey Pfeffer and Robert I. Sutton, The Knowing-Doing Gap; How Smart
Companies Turn Knowledge into Action, (2000, Harvard Business School Press),
9. John Paul MacDuffie and Susan Helper, “Creating Lean Suppliers: Diffusing
Lean Production through the Supply Chain,” California Management Review,
Summer 1997, pp. 118-150.
10. Satoshi Hino, Inside the Mind of Toyota, Management Principles for
Enduring Growth, (2006, Productivity Press), Chapter 1, “Toyota’s Genes and
11. Morgan & Liker, The Toyota Product Development System, p. 181
copyright © 2020 by
David M. Anderson
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