Effectively implementing Design-to-Cost

Design-to-Cost methods have been used in the high volume production of durable goods, such as automobiles, for many years. However, in low volume production and in the manufacturing of multi-component, one-off products such as aircraft or industrial engineering projects these methods often fail – despite the fact that well trained engineers and experienced managers are familiar with Design-to-Cost methods. Here, a paradigm shift is needed to improve this situation.

Engineers rather than controllers

From an economic standpoint, aircraft are planned at a very early stage: The sales price and operating costs are nailed down on paper even before the first design studies are done. Clearly, this type of manufacturing would be perfectly suited for Design-to-Cost or Design-to-Manufacturing methods, if they were used effectively.

An aircraft consists of a wide range of components — with between 10,000 and 1,000,000 individual parts depending on the aircraft type. And each of these components has their own individual cost structure — with various material qualities, availabilities, production methods, suppliers and required unit volumes. 

In the past, many attempts have been made to assist engineers and technicians with the preparation of expense estimates or cost calculations. Examples include the use of: internal purchasing departments, preproduction planning, costanalyzerteams, or extensive databases and IT tools. “But these things always take too long,“ says the Ingenics expert Alexandre Zisa. ”An engineer needs to know the cost of a particular part within a timeframe of between 5 minutes to 2 hours. Anything that takes longer than that is simply ineffective.” That’s also why he believes a new perspective or paradigm shift is needed: Engineers and technicians should prepare their own cost estimates and calculations. 

The operational level is decisive

Here, it is not necessary for an engineer to be familiar with the cost structure of an entire production process. Just a listing of the cost factors for 10 to 20 key technologies, tailored to the needs of individual engineers, would be more than enough. That’s because the issue here is not to achieve absolute precision – but to include rough cost estimates in the design process. And afterwards, engineers can then make better balanced decisions concerning which technology should be used, than when technologies are chosen without regarding their cost/benefit ratio.   

Don’t ignore minor components

It’s also important to base the cost calculations for the entire production cycle on comprehensive data. And here, even apparently cheap minor components, such as screws or rivets, can play a role in cutting costs. The fact that this has not been done before, is because such itemized costs are often ignored and therefore not optimized.   

Identifying buffers

When buffers are used – and they are critically important – they must also be clearly identified in the cost calculation. Otherwise, there is a danger that anonymous buffers will be concealed in each production phase – which can easily turn the entire cost calculation upside down. The solution here is simply: each buffer should be identified by name and be listed individually within the overall cost calculation.    

Communication and transparency

An additional point is communication and transparency, because an effective flow of information depends on a transparent presentation of the costs – internally as well as externally. Then you can’t really expect suppliers to reveal their cost structures, if you haven’t achieved cost transparency for yourself, at least internally. But Design-to-Cost methods in most companies only seem to work up to a certain organizational level. Employees and departments which are denied access to this type of information simply cannot conduct effective cost calculation because they lack knowledge of essential details.   

Accurately estimating production capacities

Another advantage of letting engineers and technicians perform cost calculations is their extensive knowledge of the various manufacturing methods which are available within a company. Someone who understands their own production capacities, can also design components so that they can be produced more cheaply. After all, most problems usually arise when technical solutions are in fact found, but can’t be produced. That’s why it’s important to know in advance that the theoretical costs won’t be exceeded during the later production cycle.   

Enabling people

When improvement methods such as Design-to-Cost are to be implemented, each individual employee should also be made aware of the expected advantages. If the new cost calculation model isn’t accepted internally, then the communication needs to be improved to ensure inter-departmental cooperation. Here, coaching and on-the-job training are essential for the implementation of such improvements – even when some staff members might believe that Design-to-Cost methods have already been in place for a long time. 

Finally, the introduction of “cost consciousness“ in an organization can also lead to new forms of cooperation: rather that trusting gut feelings about technologies or processes, we can work far more efficiently with proven facts and hard numbers. 

Dennis Schunigl

Dennis Schunigl

Associate Partner
Phone: +52 222 549 32 19

Johannes Eff

Johannes Eff

Associate Partner
Phone: +1.205.887.0705

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