Navigating the Cost of Increased Government Regulation for Automotive Manufacturers – Part 3: Eight Examples of Enterprise Product Cost Management in Action

Rick Burke April 16, 2015

This is the third in a series discussing the cost impact of new government regulations designed to increase automotive fuel efficiency and tighten emission standards. In the first post, Roadblocks to Profitability, we looked at some of the cost challenges created by these new regulations at different stages of the product lifecycle.  In the second, Selecting the Best Route to Cost Reduction, we provided some proven best practices for overcoming the cost impact.  In this final post, we highlight eight specific examples of leading automotive OEMs and Tier 1 suppliers putting these strategies into action.

1.    Large US-Based OEM

  • Leveraging automated costing capabilities, this OEM dramatically expanded the volume of parts/tooling that its Tooling organization can cost.  This has reduced the cost for Tooling used in production of stamped and plastic parts.
  • Batch costing has automated the daily costing of thousands of components, including tooling, to help quickly identify the difference between tooling vendor quotes and the calculated “should cost” using CAD designs and intelligent cost models.

2.    Automotive Equipment Manufacturer in US

  • With the benefit of bulk costing analysis of plastics used in North America, Europe and Asia, this company identified $2.5M in potential cost savings.  To date, it has realized $950K of that.

3.    Luxury Vehicle Manufacturer Expanding from 2 to 3 Product Platforms

  • This manufacturer’s Value Engineering team is using enterprise product cost management to identify components and systems that are not cost optimized, and improve profitability as vehicle production ramps to volume.
  • Numerous value analysis projects have also identified significant savings; e.g., examination of design alternatives for three (3) simple bracket components yielded a potential savings of > €50,000; converting a metal casting to a plastic part identified > €6,000,000 in savings.
  • The company also plans to provide its Engineering team with detailed feedback on actual cost estimates vs. target cost on new vehicle production programs using a batch costing utility integrated in its PLM system.

4.    Automotive/Transportation Equipment Manufacturer in the US

  • This company deployed enterprise product cost management with its Sourcing team and quickly identified $600K in savings working with just two of its large suppliers.

5.    Tier 1 Supplier of Automotive Seating and Electrical Components and Distribution Systems

  • Using enterprise product cost management, this Tier 1 supplier is helping its Design and Purchasing groups better understand cost tradeoffs, ultimately driving down cost across all product lines.
  • It is also helping its Engineering and Cost Engineering teams track and collaborate on project costs to meet target objectives for piece parts and tooling.
  • The Cost Engineering team is also working with Purchasing to ensure sourced materials and components support the overall cost objectives.

6.    Automotive Equipment Manufacturer

  • By generating detailed cost estimates for stamped parts, this equipment maker identified a better manufacturing process that will save it $500,000.

7.    Global Tier 1 Supplier of Automotive Driveline and Drivetrain Systems

  • This company’s product cost management system provides design engineers with a tool that enables them to meet target cost on new product initiatives by optimizing costs on new designs in their production environment.
  • It is also looking to use estimates being created during new product initiatives to collaborate with suppliers.

8.    OEM Supplier Focused on the Production of Metal and Plastic Tooling

  • For low to medium complexity tooling, this company has seen:
    • Average quote time improved 300%
    • Cost estimating overhead reduced by 55%
    • Variations between cost estimators eliminated.

Cost management initiatives like those being deployed above can benefit automotive manufacturers across their entire product development lifecycle by providing greater visibility to cost earlier in the process; facilitating collaboration among cost engineering, product development, manufacturing teams and suppliers across the globe; equipping Sourcing teams with more accurate cost information; and improving business decision making regarding make vs. buy, sourcing and manufacturing/material decisions.

Want to learn more?

Download our whitepaper, How Automotive Manufacturers Can Navigate the Cost of Increased Government Regulation.

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