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How Manufacturing Process Innovation Links Cost and Procurement

 | November 2, 2023

Key Takeaways:

  • Process innovation links cost engineering and procurement teams to improve manufacturing efficiency and quality
  • Effective cost-procurement collaboration yields fair pricing and enhances supplier relationships

The Full Article:

Balancing cost efficiency and product quality is crucial to success in the competitive manufacturing industry. One effective way to gain added value is to bridge the gap between cost engineering and procurement teams. This enables organizations to accurately evaluate and select suppliers based on their capabilities and expenses, resulting in cost-effective and high-quality solutions.

But how can the two siloed teams improve communication and collaboration to achieve better results? The answer lies in process innovation, such as implementing advanced manufacturing insights software across the organization. This innovation is crucial in dismantling organizational silos and enhancing cross-functional visibility to support better supply chain decisions.

More Than 70% of Executives Prioritize Cost Reduction and Efficiencies

The Boston Consulting Group (BCG) finds that 72% of C-suite executives worldwide focus on cost reduction and efficiency to drive long-term growth. Aligning cost engineering and procurement teams also achieves these shared goals by accelerating accurate decision-making, maximizing resources, and fostering innovation. And adopting an effective digital transformation strategy can empower cost and procurement specialists to:

  • Assess and select the most appropriate global suppliers for cost, quality, and supply chain resilience
  • Meet or exceed key performance indicators (KPIs) for cost, quality, and speed
  • Streamline design decisions and eliminate problems later in the product development process (e.g., late-stage engineering change orders [ECOs])
  • Gain precise, real-world cost insights and metrics to make informed decisions regarding product redesigns, supplier negotiations, and more

We delve deeper into the benefits and results of bridging cost engineering and procurement teams in the following sections.

Learn more about the importance of manufacturing cost estimation technology in our guide.

Modern Procurement: From Cost-Cutting to Strategic Success in Manufacturing

Effective collaboration among stakeholders, including cost engineering and procurement, enables early and informed decisions on cost, manufacturability, and sustainability. Additionally, it allows them to:

1) Ensure Components and Raw Materials Are Fairly Priced Using Digital Technology

Manufacturers aim to purchase components and raw materials from strategic or global suppliers at a fair price while ensuring product quality. With a digital solution such as aPriori’s Manufacturing Insights Platform, product innovators can:

  • Gain actionable, real-time cost feedback. aPriori provides a digital representation of an organization’s supply chain. It allows the manufacturing process to be simulated directly from 3D CAD, equipping teams with real-time cost insights that can be acted upon. aPriori’s automation-driven solution provides precise expense breakdowns based on real-world manufacturing variables, including cost, material availability, and supplier capabilities. These insights make internal product development teams more accurate and faster in cost and procurement decision-making.
  • Balance crucial trade-off decisions. aPriori solutions improve cross-functional collaboration, ensuring that organizations’ priorities for product cost, manufacturability, and sustainability are balanced and met. Teams can quickly assess the impact of alternative regions, materials, routings, volumes, and batches to achieve their profitability and sustainability goals.
  • Achieve significant savings on crucial parts. Danfoss and other leading innovators employ aPriori to improve cross-functional collaboration and assess products early in design for cost optimization. Danfoss saved $20 million on parts while creating high-quality products in less time with aPriori. Getting to market faster ensures that Danfoss maintains a competitive advantage in the industrial machinery industry.
  • Perform outlier analysis and utilize actionable reports. Cross-functional teams can leverage aPriori to perform cost outlier analysis, manipulate data, and create reports to aid continuous improvement. aPriori can help with various aspects such as material utilization for negotiated costs, assessing make vs. buy decisions, consolidating suppliers, and diversifying the supply chain to mitigate risk.

Companies can involve subject matter experts (SMEs) in the product innovation process along with digital technology to unite cost and procurement teams. These experts’ experience can help manufacturers build fact-based cases, improve collaboration through shared insights, and strengthen their supply chain activities.

See our brochure to learn how aPriori helps forward-thinking companies improve their profitability.

2) Make Informed Reshoring and Location-Based Decisions

When manufacturing costs and carbon footprint concerns emerge, cost engineers and procurement managers can collaborate to reassess their supply chain locations. For instance, they can compare the energy mixes across various global regions and determine the implications of using coal, natural gas, and other sources. By collaborating effectively, manufacturing companies can potentially return production processes domestically, resulting in long-term cost savings and lower environmental impacts.

Manufacturers can unify cost engineers and procurement specialists to manage supply chain risks and disruptions. With a solution like aPriori, these teams can conduct “what-if” scenarios and select the optimal location to source and manufacture a new product innovation. When these teams share a common language, they can quickly identify and address potential risks to build a more resilient and cost-effective supply chain.

3) Enhance Engineering-Sourcing Collaboration to Optimize Supplier Management

Establishing productive, mutually beneficial partnerships with global suppliers necessitates effective collaboration between engineering and procurement teams. This entails constantly managing supplier relationships by mitigating risks, meeting performance goals, and encouraging continuous innovation. Prioritizing clear communication and using collaborative, data-driven technology is crucial for the long-term success of procurement and engineering teams.

In addition, procurement can stay updated on changing requirements through effective collaboration between sourcing and engineering. Further, sourcing can proactively engage suppliers in the early stages of product design to maximize value creation.

Alignment between cost engineering and procurement facilitates more productive, transparent, and open discussions with suppliers. With a solution like aPriori, procurement can confidently negotiate pricing with suppliers backed by fact-based estimates, making these discussions more collaborative and fruitful.

Bridging Cost Engineering and Procurement for Sustainable Success

In the competitive manufacturing industry, linking cost engineering and procurement through process innovation is crucial. These teams need a seamless co-working process that enables them to ask questions and exchange critical manufacturing data.

Companies must be able to integrate this information into product development through digital transformation. When teams collaborate effectively, it streamlines business processes, reduces manufacturing costs, and ensures long-term success for product innovators in today’s market.

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