Shipulski On Design

Archive for the ‘Manufacturing Competitiveness’ Category

Lean has been beneficial for many companies, helping improve competitiveness and profitability. But, lean has not been nearly as effective as it can be because there is a missing ingredient – product design. Where lean can reduce the waste of making and moving parts, product design can eliminate the parts altogether; where lean can reduce setup times for big machines, product design can change the parts so they no longer need the big machines; where lean can reduce inventory, product design can eliminate it by designing out parts; where lean can make the supply chain more efficient, product design can radically shorten it by designing out the long lead time elements.

The power of product design is even more evident when considering the breakdown of product cost. Here is some data from Nick Dewhurst taken from multiple-hundred DFMA analyses showing the typical cost breakdown of products.

Of the three buckets of cost, material cost is by far the largest 74%, and this is where product development shines. Product design can eliminate 40 to 50% of material cost resulting in radical cost savings. Lean cannot. I will go a bit further and say that material cost reductions are largely off limits to the lean folks since it requires fundamental product changes.

Side note – Probably most surprising about cost breakdown data is labor cost is only 4%. Why we move our manufacturing to “low cost countires” to chase 50% labor reductions to net a whopping 2% cost reduction is beyond me, but that’s for a different post.

Let’s face it – material cost reduction is where it’s at, and lean does not have the toolbox to reduce material cost. There’s no mystery here. What is mysterious, however, is that companies looking to survive at all costs are not pulling the biggest lever at their disposal – product design. Here is a bit of old data from Ford showing that Product Design has the biggest lever on cost. We’ve know this for a long time, but we still don’t do it.

Clearly, the best approach of is to combine the power of product design with lean. It goes like this: the engineers design a low cost, low waste product that is introduced to the production line, and the lean folks improve efficiency and reduce cost from there. We’ve got the lean part down, but not the product design part.

There are two things in the way of designing low cost, low waste products in a way that helps take lean to the next level. First, product development teams don’t know how to do the work. To overcome this, train them in DFMA. Second, and most important, company leaders don’t give the product development teams the tools, time, and training to do the work. Company leaders won’t take the time to do the work because they think it will delay product launches. Also, they don’t want to invest in the tools and training because the cost is too high, even though a little math shows the investment is more than paid back with the first product launch. To fix that, educate them on the methods, the resource needs, and the savings.

Good luck.

I have been watching the news and listening to the pundits, and, apparently, we are steaming out of the great recession and the manufacturing flywheel is nearing full speed.

As we all know, that’s a bunch of crap.  Many manufactures are still in survival mode where cost cutting has crossed into the ridiculous; where the best talent has been cut; and where the product development flywheel is motionless.  We are far from coming out of this thing, and the bad stuff we had to do to survive will take time to undo.

However, some companies are considering options to accelerate themselves out of the soup.  They are asking the big question – what is the fastest way out?

To me, the fastest way out is all about three things: product, product, product — do you have the right products coming to market?  Or, if not, how can you get your product development flywheel moving so the right products hit the market as quickly as possible?  But, what are the attributes of the “right product”?

I think there are two components of the right product: the top line component and the bottom line component.  The top line component (which drives top line growth) is all about function and features.  More function equals increased sales through market share and price.  The bottom line component (bottom line growth) is all about cost.  Pretty basic.  But, if your resources are limited (like most of us) and can improve only one, which should you improve?

Bottom line cost reduction is not glamorous, but the balance sheet improvment is surprisingly good.  Let me give an example.  Product A is an existing product that sells for $1000 and it costs you $800 to produce, providing $200 profit per unit.  You spend your product development resources on a bottom line effort and reduce product cost by 20%.  Still selling for $1000 but with a cost of $640 (0.8 * $800), profit dollars increase by 80% ($360 vs. $200).  Not bad especially since sales have not increased.

Top line growth has a strong emotional component which energizes people, and the upside potential is huge.  Here is an example using the same product as above.  Product A still sells for $1000, costs you $800, and you make $200 per unit.  You spend your product development resources on a top line project to add better functionality and more features.  Because you don’t have time to address the bottom line component, your costs go up 10% (to $880).  But, you do get the function and features you wanted, and the market can support a 10% price increase to $1100.  Profit per unit is up 10% t0 $220 ($1100 – $880).  Your engineering really came through and the market likes your new product and sales increase by 20%.  With all that, profit dollars increase by 32% ($220*1.2 = $264 vs. $200).

Clearly the examples are contrived to illustrate a point: bottom line cost reduction is powerful and so are top line sales growth and price increase.  And the best answer is not to choose between top line and bottom line components.  It makes a lot of sense to do a little of both, because it’s the fastest way out of the soup.

(This post was published as an article.  View the article as a .pdf or .htm.)

Have we read enough, talked enough, circled, and delayed the issue enough to finally do something about the decline in US manufacturing?  Are we afraid enough yet, after each quarterly government trade report, to undertake what is obvious as far as engineering goes? We have the technical know-how in US manufacturing to take away the offshoring advantage of cheap labor.We can design high labor costs out of most products and have elegant assemblies ripple profitably down US manufacturing lines—for export and domestic consumption.

“We have to reassign the product costs mistakenly
placed on manufacturing departments.”

Read the rest of this entry »

Results from a new survey show that upfront design using DFMA methods creates significant savings in operational cost — downstream savings.

An exerpt from the survey:

Sixty-eight percent of a survey group, including Fortune 400 companies, measured an increase in production throughput, and 47 percent an increase in profit per unit of factory floor space, after applying Design for Manufacture and Assembly (DFMA®) techniques to their organizations’ supply chains. A roundtable discussion of these and other results from the questionnaire, conducted by Boothroyd Dewhurst, Inc., is now available.

Respondents included Dell, Motorola, TRW Automotive, Raytheon, MDS Analytical Technologies, Magna Intier Automotive Seating and other leading North American manufacturers. Some participants also contributed to a candid roundtable discussion about applying design simplification and early costing to Lean and Six Sigma programs, along with the opportunities missed by industry in measuring financial best practices.

Five-year implementation of DFMA software by Hypertherm creates higher profits and strong business model for improving U.S. global competitiveness

WAKEFIELD, R.I., and HANOVER, N.H.,USA, June 2, 2008—Hypertherm, the world leader in plasma metal cutting technology, has achieved a 600 percent increase in profit per square foot of factory floor space using Boothroyd Dewhurst, Inc., Design for Manufacture and Assembly (DFMA®) software within a five-year redesign program. Correspondingly, warranty cost per unit has declined more than 75 percent during that same period, from January 2003 to January 2008.

  Read the rest of this entry »