The High Cost of Not Costing
By John Gilligan, President, Boothroyd Dewhurst, Inc. and Nick Dewhurst, Executive Vice President, Boothroyd Dewhurst, Inc.
Introduction
Advances in product development technology—ranging from CAD to CAM to CAE and finally PLM—are snowballing as a result of high-speed computing and new software architectures. Breakthroughs that often occurred first within individual disciplines, or silos, have now spread across more integrated sets of complementary tools. Take the tight interwoven performance of CAD and NC programs and the rapid and ever-expanding reach of CAD into factory simulation and even business planning, and back again to design.
Driving the development of such productivity-focused programs is recognition, by manufacturers and vendors alike, of the deep interrelationship of design and manufacturing and the importance of their concurrency as a business strategy. Design decisions impact manufacturing. Preparation for the realities of manufacturing are being pushed earlier and earlier into design.
A dialog between design and manufacturing that informs and facilitates profitable changes to product geometry, materials and processes, has been the twenty-year goal of the Concurrent Engineering movement. That same quest for concurrency propels the all-digital product development environment. Yet the ultimate value of a dialog between systems and between people is whether buyers have products they want at the right cost–and whether manufacturers receive a profit for making them. Consumer acceptance and profits are the final test of any manufacturing strategy.
State of Product Costing Today and DFMA
Early cost analysis and product simplification through Design for Manufacture and Assembly (DFMA) is fundamental to achieving profit targets.
Why do we know this? Because the significant financial benchmarks reported by companies using DFMA software, across a twenty-five year timeline, are strikingly the same year after year. This is as true for 2009 as it was for 1999, and as it was for 1989. Companies that initiate DFMA practices cut, on average, roughly 50 percent of their total product costs–with labor reduced 42 percent, parts 54 percent, assembly time 60 percent and product development cycle time 45 percent.
The results have also occurred alongside, and sometimes regardless of, major productivity breakthroughs in CAD/CAM/CAE/PLM and steady implementation of lean manufacturing and Six Sigma. They span all types of industries and include high and low volume production.
Why do major manufacturers world-wide still consistently achieve such savings, even as they deploy new organizational and technology strategies? The answer is that early product simplification and costing analysis with DFMA has a positive, reverberating effect on everything that follows. When you consolidate separate part functions into single, elegant, multifunctional components, they no longer require additional resources stretching from CAD through the supply chain to delivery and even service.
Merging the greatest functionality into the fewest parts eliminates many of the component interfaces that contribute so heavily to quality failure and derail the best Six Sigma efforts. Likewise, lean manufacturing approaches are aided when products are designed upfront for assembly efficiency. Lean design is lean manufacturing.
As PLM-based programs tackle visibility, tracking and simulation of the whole development chain, DFMA creates a foundation of product efficiency so these systems can continue to shrink organizational costs and aid business decisions.
It is apparent, however, despite substantial progress during the last twenty-five years building better systems and communications across different disciplines of product development and production, that there remain huge opportunities for improvement. When a ten-to-fourteen percent return-on-investment in good times is considered excellent for manufacturers, how could industry fail to systematically adopt a product costing process with historical savings of up to 50 percent? The answer is that there are still too many rudimentary problems in the discourse between design and manufacturing, OEM and supplier. Let’s start with how most manufacturers cost-out their designs.
In general, costing practices break down into four central approaches: parametric, industry, supply chain and DFMA conceptual stage cost modeling. The first three are largely price modeling based on historical supplier bids and select industry data. This is how most manufacturers gather costs. But detailed as they are, price models are better at telling you where you have been than where you are going. They lack a scientific foundation and don’t give teams a solid footing for a dialog on relational manufacturing costs.
Traditionally under price modeling, a design gets fully detailed in CAD–the team is then deeply invested in that particular product configuration–and it goes out to bid for several weeks. When the design quote returns, if it has missed its target price a panic ensues. Two things then commonly occur: the product is de-featured to cut costs and the supplier margins are slashed.
To create new, truly innovative products that are more than just iterative improvements of past designs, you need early cost modeling. And by early, we mean cost analysis that works even from the rudimentary geometries of a pencil sketch or loosely dimensioned industrial design drawings. It is vital that engineering teams and suppliers be able to quickly arrive at a cost profile before the design slips into the next stage gate toward its launch date.
Using DFMA, a cross-functional team can review parts and assemblies in the software and build cost data feature-by-feature from crude geometries or from downloaded CAD files of existing products. Experts from manufacturing can then interrogate the design using default libraries or by adding their custom manufacturing processes. The DFM library gives them a comprehensive understanding of the costs to manufacture parts by means of range of processes, from sheet metal stamping, machining, injection molding, to sand casting and more. If target manufacturing costs still need refining, Design for Assembly (DFA) provides more insight for the team to consolidate features into single, cost-efficient components.
Re-Engineering Toward a Cost Target: Deere
Let’s look at this process in action. When Deere introduced its cleaner-burning family of Tier 3 engines, modifications were required on one of its combine harvesters. The swing-out landing deck, used during maintenance, needed to be made larger and more rigid, without adding weight or significant cost. First estimates indicated that the redesign would be eight percent above target cost, and the supplier quote was 26 percent higher than expected.
Deere and its suppliers then brainstormed with DFMA software. Attacking both the design and manufacturing elements of the assembly together, they came up with 83 new ideas for design improvement. For instance, by shortening the landing deck sheet of perforated metal, Deere could buy less-expensive lengths of standard-sized sheet. Reductions in scrap on the redesign contributed to a final material savings of 60 percent. Another cost idea that also increased performance was switching from a fabricated C channel to rectangular steel tubes. This alternative served to eliminate a metal-forming step, decrease weight and improve structural rigidity–increasing usability for the customer. Less weight, in turn, means the equipment uses less energy to operate.
Such engineering achievements are a perfect example of how innovation and profitability can arise from using a quantitative costing approach in a close, interdisciplinary setting. In the end, the engineering team actually beat its original target cost by seven percent for the whole landing deck, streamlining the ladder assembly, for instance, from 17 to ten parts. At Deere, suppliers are rewarded for cost-saving ideas. This practice creates a sound business model for both OEM and supplier.
Teaching an Engineering Business Model at Motorola University
The first company to track and scale the effect of DFMA product simplification on Six Sigma quality was Motorola Inc. in 1990. They learned that as assembly efficiency ratings improved and part count dropped, their products exhibited increasing movement toward Six Sigma. An understanding of the relationship between design choices and manufacturing quality has never been lost at Motorola. Today, Motorola University, with campuses around the globe, teaches its employees, customers and supply chain partners how to integrate their Six Sigma program with lean and DFMA initiatives.
With labor rates climbing even overseas, designing labor-efficient products with improved features and customer-winning quality is a business directive. At the Motorola Quality Institute (MQI) in Taiwan, engineering teams and business managers join in the exercise of redesign and keep business scorecards that reflect customer goals and key performance indexes associated with Six Sigma and DFMA analyses. A recent MQI project with a top electronic-device manufacturer on 12 product redesign projects yielded savings of $6.8 million in four months.
Although best practices regarding snap fits or cabling are applied generation after generation in electronics by the collective development chain, with DFMA and quality methods blended teams training at MQI reached average part-count reductions of 11 percent for mature, evolving products and 35 percent for new products. One 90-day session by the “students” (which can include Six Sigma black belts and other experts) produced savings of 30 percent on part count and assembly time for a PDA, 41.3 percent part count reduction on an LCD TV, and a 57.5 reduced part count on a server. As noted by one instructor at MQI, the systematic use of DFA overcame any hypothetical resistance against innovation.
A Small Supplier Embraces DFMA for Bidding: Aztalan
Conceptual stage cost modeling isn’t just for large OEMS. Because of renewed pressure on OEMs and suppliers to reduce product costs, suppliers have a unique opportunity with DFMA software to advance their expertise and help OEMs achieve their goals.
Aztalan Engineering, Inc. (AEI), a machine shop in Lake Mills, Wisconsin, has made DFMA costing a cornerstone of its best business practices. DFMA helps Aztalan produce accurate and detailed quotes, explore design and manufacturing strategies, assess manufacturability, decrease manufacturing costs, and effectively manage in-house machining, their customers and their supply chain.
When an OEM customer sends a CAD model of a proposed new part, AEI transfers the geometry into DFMA. The purpose is to review design complexity and manufacturing strategy with the original design engineers and make the best economic decisions. This broad, quantitative assessment of the design on behalf of customers can lead AEI to eventually include outside parties who can help in forging, casting and other areas beyond the shop’s main expertise in machining.
A side benefit of the concurrent costing exercise is that because part quotes are extremely detailed, the shop can also print a report from the DFMA software and use it as a manufacturing-ready road map for part production–defining face or pocket milling operations, establishing fixturing and part density, and calling out necessary machinery and specialty tooling. This ensures that the physical process closely matches the as-costed process. Every supplier wants to make the best products they can, and influence the design so that it comes in at cost and frees their resources for other projects. Conceptual stage cost modeling is a value proposition for the supply chain, too.
And that raises an important point about the causal nature of design on the business aspect of manufacturing. Design decisions about features and processes affect all downstream activities in the organization. Reduce product complexity and you have saved money from testing and prototyping, part and material tracking, CAD and PDM, production throughput, inventory and shipping, to warranty and service of products. Use DFMA to understand costs and you can increase product functionality for customers and hit the market price they are willing to pay.
Companies have proven for twenty-five years that DFMA is basic to creating products that are more competitive. Costing your product designs is not like the engineering challenge of creating cold fusion. Early product costing is a powerful tool available today. It does require that resources shift from the back-end of development to design. But most of the back-end cost of test, validation and re-work is not where anyone in manufacturing wants to spend their money. Overall, the design-to-product launch cycle shrinks under DFMA. Profits from downstream savings increase dramatically, and labor-efficient products give engineers an accounting argument for continuing to produce goods in their country of origin.
Rear view of a Deere combine harvester, showing the swingout landing deck. The pullout ladder provides service access to the combine during maintenance. Deere engineers modified the landing deck assembly to accommodate the company’s new EPA-certified Tier 3 engine. Design for Manufacture and Assembly (DFMA®) software from Boothroyd Dewhurst, Inc., helped achieve a cost-effective redesign.
View showing the redesigned swingout landing deck with the ladder stowed. DFMA brainstorming sessions with Deere design and manufacturing engineers, supply management, and suppliers yielded 83 ideas for improving the previous design. Changing the size of the perforated deck sheet, for example, saved 60 percent in raw material cost for the part.
View of the assembly with the ladder extended. One new suggestion was to use rectangular tubes for the ladder siderails, instead of round tubes, to reduce unnecessary processing on mating parts. A cost-conscious supplier also pointed out that shortening the siderails by 3mm would gain more economical use of a standard tube length.
