How Caterpillar Uses aPriori in Its New Product Introduction Programs

Caterpillar has been a customer with aPriori for many years. They have aPriori product cost management deployments going on at the different divisions around the company and around the world.

Steve Vito, a Supplier Collaboration Engineer in Caterpillar’s Paving Products Division, recently presented at our Cost Insight event to share examples of how aPriori is instrumental for Caterpillar’s New Product Introduction (NPI) programs. The following is an edited version of his presentation.

Proactive Cost Modeling Through New Product Introduction (NPI)

As a Supplier Collaboration Engineer at Caterpillar, my role is to be the mediator between our design engineers and our supply base. We strive to work towards design for manufacturability and cost. I ask the design engineer “how can I make that part?”, and then I work with our suppliers to ensure that our partners can make the part better, more efficient, and at the right cost.

Caterpillar is trying to be proactive about cost and our design decisions. Being proactive means getting out ahead of cost and understanding what that cost is going to be before release to manufacture. Being proactive versus reactive is something that we are really striving to do, and aPriori is helping us with that.

Business problems that aPriori is helping Caterpillar solve:

1. Manual costing

In the past when we looked at cost, we did everything from a drawing. All of our calculations were manual and it was very time-consuming. Because aPriori derives data from the CAD model, costing is much more efficient and accurate. That’s helping us with time to market, making better design decisions based on cost, and improved design.

2. Eliminate the need for cost reduction

One of the things we’re doing with aPriori in the NPI process at Caterpillar is trying to eliminate the need for cost reduction. That is our goal. If we don’t have to do cost-reduction projects then we don’t have a need for additional resources (saving money). With aPriori we are validating the cost model, making sure it’s accurate in scenarios around the world (US, China, Europe, South America – wherever we are going to manufacture our parts). We are using aPriori and the regional Virtual Production Environments (VPEs) to tell us what that cost should be.

Benefits to Caterpillar Using aPriori as a Primary NPI Tool:

• Identify cost drivers in early-phase designs
• Select suppliers that deliver a robust, feasible process at the right cost, the best in quality, and the best delivery performance
• Guide cross-functional teams (i.e. Quality, Service, Design, Mfg., Tooling, Purchasing, etc.) to balance people, quality, velocity, and cost targets
• Key communicator for collaborative product and process development
• Shrinking the gap between a validated cost model and a supplier quote by identifying sources of gaps (i.e., labor times, rates, material utilization, setup times, margin, etc.), and negotiating a resolution to the cost gap
• Design for manufacturability and associated cost during collaboration

The Lifecycle of Caterpillar’s NPI Programs Using aPriori

We follow the standard lifecycle for our new product introduction programs including the following phases: concept, development, pilot, and production. Utilizing aPriori’s cost modeling software in each of these stages saves us time and money, and helps us to make better design decisions.

Concept

At the beginning of an NPI program at Caterpillar, our marketing department compiles the voice of the customer, puts that together into a strategy, and then conveys that strategy to our engineers. This begins the concept phase, where our engineer’s design is based on that data. In this phase, we are looking at cost from a directional standpoint. We build a cost model based on a very immature design at this point.

aPriori Use Case Example:

If an engineer is making an adjustment (such as adding holes or changing the size of the part) in their CAD system using aPriori, they can click “cost” after making those geometry adjustments, and they can see the change in the cost right away (see image 1) without ever leaving their CAD system. This helps us to avoid cost directly in the concept phase, rather than waiting until the later stages when layers of details have been added to the design model.

Image 1

Development

In the development stage, the design is becoming more mature. We work with the engineers to tighten up the design and the cost while considering suppliers. The goal is to have less contingency in our cost rollups.

aPriori Use Case Example:

In aPriori, you can break down an assembly by subcomponents or subassemblies and you can look at cost in those individual areas (see image 2). So if you want to dive into the cost of one particular component, you have the ability to do that. This is useful for Caterpillar because when we’re getting feedback from suppliers if they have to make changes to the material or to tolerances, they can do that at the individual level instead of trying to do this all just at the top level.

 

Image 2

Pilot

In the pilot stage, which is when we’re going to actually build the machine (the first prototypes or pre-production machines), we update our cost estimate and work with our suppliers with the latest information. This process ensures we are working from a negotiated quote, using the cost estimate as a starting point.

aPriori Use Case Example:

After completing a cost model for a part we are making in China, our buyer was able to negotiate the quote with the data retrieved from the aPriori cost model. In this particular assembly, Caterpillar was able to reduce the estimate for tooling by 65% and reduce the quote by 25%. What’s most interesting is this reduction got us within 3% of the aPriori cost estimate. This amounted to a savings of 153,000 CNY. Image 3 is the email exchange between Caterpillar’s engineer and the buyer.

 

Image 3

Production

During the production phase, we’re still updating and constantly monitoring our cost based on:

• Market conditions
• Fluctuation in material prices
• Regional modifications

aPriori Use Case Example:

Caterpillar was trying to evaluate a cast version of this component (see image 4) compared to a sheet metal assembly fabrication of that part. By using aPriori, we found out that the casting was a little more expensive than the sheet metal assembly. However, Caterpillar chose the casting version. We made a successful design decision based on other factors; cost is just one part of the equation and is not always the number one consideration. Considerations included:

• Quality of the part
• Time to manufacture the part
• Cost

Image 4

As you can see in these examples, aPriori is providing the needed flexibility for us to get our design, quality, and cost goals right the first time.

To dig further into this topic, check out our white paper, Are You Overpaying for Your Outsourced Parts below: