Prime Advantage Blog

A Broader Approach to Value-Engineering

Dan Grant on Feb 2, 2016 1:06:34 PM

It seems that the soaring optimism manufacturing has enjoyed the past several years has started to level off. Some manufacturers are bracing themselves for the call from their customer saying they need a lower price. For others, it may just be time to review a product or reposition it in the market. It’s never an easy task to cut cost out of your finished goods. Redesigning a product that is meeting the needs of the market is not usually the right action to take. Addressing the existing design may involve a sometimes painstaking process of finding potential substitutes for components that are working and performing well. The solution here is not to have a value-engineering project, but to instead kick off a value-engineering event.020216_Image

The first step to such an event is targeting your finished product on a larger scale. Put your product on display and bring in your suppliers and potential suppliers to pick their brains. There is obviously a fine line to walk, and this approach requires commitment and confidentiality from the participants. But pull it off and you just might gain a wealth of knowledge and outside of the box thinking.

This type of process isn't about asking a supplier to lower its price, or finding a different supplier at a lower price. Asking outside resources to suggest a better route may bring you bigger savings than a reduced price. Perhaps the component can be pre-wired or even bought as a full assembly? This would decrease your time to manufacture and deliver cost savings along the way.

There are added benefits to bringing your engineering team together with your vendor to share knowledge. Suppliers can offer layers of information including better ways to connect their parts with other components within the product, or more efficient means to deliver the parts to you and save time during your manufacturing process. Suppliers know how their products are used better than anyone and have likely learned a lot from their customers. Plugging into this knowledge can bring expertise to your team.

Bringing operations into the fold can help you target where they are spending the most time to produce the finished good. Connecting suppliers to the pain points of how you are using what they deliver can also help you find savings that will impact your bottom line. Maybe they can package the component differently to accommodate your production. Or maybe they can deliver several components bundled to save time when pulling raw materials from inventory.

Keeping the feedback loop open during change implementation will allow you to adjust and keep your intended modifications on track. This will make sure the assumptions you make during the idea phase are becoming a reality on the production floor.

Bringing your engineering, operations and procurement team together to solve the problem keeps everyone on the same page. This will allow you to apply your newfound processes and produce the intended savings. When the savings plans are created in a vacuum they could be negated by behavior in the next stage of the process. Knowing the full effects and ensuring the decisions can be implemented will transform the concept into savings every time.

Industry insight drives operational cost savings

Topics: Manufacturing, Talent and Leadership

Dan Grant

Posted by Dan Grant

Daniel Grant is the President of Prime Advantage, a Chicago-based Group Purchasing Organization for mid-market manufacturers.

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