Strategies for Successful Design-to-Cost Initiatives
Interview with aPriori Client Engagement Manager, Rick Hyde
Question: As I understand it Rick, you are an engineer by trade and then you moved into supply chain and cost management. Can you talk about that transition and what led you to it?
My first position out of college was in an aerospace and defense company. I was working on a program where we were in a unique situation. We had to get the cost down or the customer wasn’t going to continue buying the product. Long story short, we didn’t end up getting the cost down, so the customer stopped buying our product. This really solidified for me the idea that, even though you have the right technical solution, if it’s not the right cost, you don’t have anybody to sell it to, so it’s not a great solution after all. That really sparked my interest in understanding how cost is really a critical function of any engineering design.
“Even though you have the right technical solution, if it’s not the right cost, you don’t have anybody to sell it to, so it’s not a great solution after all.”
From there moved into an Affordability role, where I was responsible for the entire cost of a project, not only the engineering cost, but all of the other costs that went into a complete program. It really gave me a holistic view of how cost impacts the success of a product, or how a product design impacts cost. Since coming to aPriori, I’ve really come to understand how having a standardized methodology, or standardized tools, is foundational to a cost strategy.
Question: There is a big movement to “Shift Left” in product development and QA as manufacturers try to accelerate cycle time by identifying and addressing product quality issues sooner. Many aPriori customers are trying to apply those same principles to product cost as well. How is this taking shape in the client organizations you are working with?
I think for many decades, people have been focused on design for manufacturing (DFM), to try and reduce the manufacturing defects they see in the design phase, and manufacture the best product they can. We’re seeing a lot of our customers translate that to cost as well. We’ve all seen that curve where 80% of your costs are committed in engineering. Our customers see that big block and they want to attack it, and that’s the right thing to do. The thing they they need to be mindful of – and we coach a lot of our customers on – is making sure that they have a sound strategy in place first. Similar to a DFM process, they need a cost strategy process. That involves the methodology, the tools, the process, the training, and really making sure that they have that foundation to build upon, similar to what we saw with the DFM movement.
DTC Strategy #1: Place Accountability within Engineering
We see customers attacking this a couple different ways. I’d say the most prevalent way is actually giving that accountability to the engineer themself, and saying that, “You, engineer, are responsible for the cost of your designs, and you need to come to your design review with an accurate cost estimate.” In order to do that, we need a lot of training within engineering. We need to provide them with the tools to do that, but we also need to make sure that they understand the process for getting there and what to do with that cost once the tool generates an estimate. It’s a great way to attack cost at its core, because you have the same person making design decisions as you have making cost decisions. They know where the margin is and where to attack it.
DTC Strategy #2: Maximize Leverage of Cost Engineering
The other prevalent strategy that we see a lot is taking advantage of a cost engineering organization. An organization that may have subject matter experts in manufacturing or sourcing, and taking advantage of that deep bench that they already have to supplement the engineering design organization. Frequently we see cost engineers sitting side by side with design engineers while they’re designing providing that feedback to them, and giving that manufacturing expertise on the fly in helping them along with the cost estimates.
DTC Strategy #3: Hybrid Approach that Connects Engineering & Cost Engineering
The third thing that we see, and this is more of a hybrid approach, is we see the design engineer have the ultimate accountability, and they are using aPriori to get that design feedback, but then they’re going to a cost estimator, or a cost expert, and saying, “What are the assumptions that need to be in here? How do I make this a true market value, or a true market price, and what do I need in order to do that?” That sets them up for success to go right into a sourcing use case. They’ve got that highly accurate cost estimate that they can just take and send over to sourcing that they can use for negotiations.
Learn how product cost management strategies are working in real time for one of our clients, Soucy International.