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3 Ways Manufacturing Insights Reduce Inflationary Costs

 | September 6, 2022

Time is money. In the face of rising costs, the pandemic continued supply chain issues, and other disruptors, no truer words have been spoken. Inflationary pressures have been felt acutely among manufacturers. Automated manufacturing insights can alleviate these woes.

A January 2022 PwC Pulse Survey noted that 68% of manufacturers believe inflation will continue through the end of 2022. In the same survey, 73% of manufacturers revealed that they will need to increase their cost of goods and services sold (COGs) to offset increasing prices on raw materials, parts and components, and other input costs to protect gross and profit margins.

What can manufacturers do to counteract cost increases? The same survey found that 60% of respondents agreed that more agility was necessary to navigate these headwinds and ensure growth. How can design engineers and others in manufacturing mitigate rising costs associated with parts and components production? One method can be found in automated manufacturing insights.

In this article, we will touch upon the challenges manufacturers face in the current climate and explain manufacturing insights. Additionally, we will cover several ways it can help decrease the associated inflationary costs.

How Does Inflation Affect Manufacturers?

Changes at the design phase have the biggest cost impact on a product’s cost. Did you know that 80% of the product’s cost is determined at this point? It also creates a ripple effect that leads to other costly issues, including:

  • Rising costs for raw materials. Increased demand and more shortages lead to higher costs for raw materials; often compromising breakeven points for manufacturers.
  • Conversion (cost in turning a material into a part) and routing (the path followed in each stage of the manufacturing process) can easily be compromised due to shortages, delays, and higher costs.
  • Supply chain and labor shortages lead to slower times to market.
  • Supply storage upcharges are the result of offshore container ship delays and longer storage cycles due to supply chain disruptions.
  • Higher prices for fuel get passed onto manufacturers on both the receiving and delivery ends.

The good news is that the right manufacturing insights platform can alleviate most, if not all, of the ways that inflation effects manufacturing.

What are Manufacturing Insights?

Manufacturing insights include manufacturability, cost, and sustainability feedback early in the design process. Fully automated technologies like aPriori work in the background to analyze your CAD model, which is the digital twin of the product. When the 3D CAD model is checked into the Product Lifecycle Management (PLM) system, manufacturers receive critical feedback. For example, aPriori provides a 3D CAD geometric analysis for a single part in complex assemblies.

aPriori goes a step further with its digital factories, which provide a digital twin or virtual representation of the physical manufacturing process. Manufacturers can select an in-house or supplier factory, specific machines, materials, and processes, and their preferred regional and industry labor rates for their digital factory. Recommendations, via reporting and analytics, to improve the manufacturability of the design are generated. For example, a design engineer may discover a particular design feature is complex to manufacture, significantly increasing the overall cost. The design engineer can redesign, or choose a different manufacturing method, to reduce complexity and cost early in the process.

If a material substitution (due to supply issues such as the semiconductor chip shortage or the Ukraine war) creates design for manufacturability (DFM) challenges or if there are tolerance issues – the design engineer will be alerted. Perhaps a hole that was punched needs to be machined instead. Design engineers also can make non-invasive design modifications, enabling production in a different factory. To manage any revisions or design changes, engineers use the digital thread to collaborate with sourcing and other teams. At the same time, they maintain a single source of truth from the design file through production.

Three Ways Manufacturing Insights Alleviate Inflation

A McKinsey article noted that a volatile inflationary environment is here to stay. With the price of steel jumping 3.6 times between the second quarters of 2020 and 2021, it is not surprising that manufacturers are grappling with adjusting their prices while ensuring sustainability. Manufacturing insights has the power to alleviate many of these inflationary concerns with the following:

  • Faster time to market: Design flaws can be caught earlier in the cycle, ensuring faster time to market. It also reduces iteration cycles and less costly redesigns later. Manufacturers are more proactive, allowing them to develop, fine-tune and create parts faster. Additionally, manufacturers can use time saved to iterate new products to remain a competitive force.
  • Engineering Change Orders (ECOs) reduction: Manufacturing insights reduce ECOs, which are costly and delay time to market. If necessary, design engineers will receive feedback to redesign parts for maximum value and superior cost efficiency. Additionally, cost-efficient design choices can be made the first time a new part is designed.
  • Cost targets achieved: Automated manufacturing insights can make onshoring or reshoring a real possibility. Manufacturers can compare the cost of manufacturing in a region with lower labor rates and add on shipping costs, with higher fuel prices and potential shipping delays, with the cost of manufacturing locally, at various volumes. A specific design may rely on costly or difficult to obtain supplies. Automated manufacturing insights can identify where a company is exposed to a specific material or region, which could mean finding an alternative supplier or redesigning the part to work around supply chain delays and more costly components.

For instance, aP Analytics can display dashboards to show which materials are used the most in a design, leading to high exposure to price increases. Highlighting exactly which parts use those materials. Although labor costs might be higher with onshoring, they could be negated or evened out due to rising offshore costs. Moreover, onshoring convenience might further reduce risk. Micro factories can offset higher costs with lower volumes and fewer shipping channels. Trade-off analysis allows visibility into the cost and supply chain impact of making material, manufacturing (i.e.-machining instead of casting), volume, and design changes.

Seven Additional Manufacturing Insight Benefits

In addition to the above ways automated analysis can mitigate inflationary costs, there are other benefits:

  • Greater profitability via actionable design insights that provide huge cost reductions and boost the bottom line.
  • More agility to pivot as necessary, making decisions quickly and confidently to stay ahead of the competition and capture market share faster.
  • Real-time collaboration and enhanced communication through shared visibility from the design team to production.
  • Reduced design churn with suppliers and elimination of wasteful feasibility loops.
  • Better design productivity thanks to an intuitive, user-friendly platform.
  • Effective management of cost, sustainability, and manufacturability initiatives before any time-consuming and costly downstream activities occur.
  • Detailed design scenario comparisons– Compare designs, materials, manufacturing processes, costs, and environmental impacts. Then consider trade-off analyses and recommendations.

Combat Inflation, Achieve Manufacturability, Cost, and Sustainability Goals

Automated manufacturing insights like aPriori’s enable design engineers to work faster and more effectively. The technology can automatically determine the most efficient part manufacturing method while simultaneously offering feedback to reduce design and material costs. It also supports “make versus buy” decisions that manufacturers often face. Perhaps they currently buy a part or assembly. The supplier could be at risk, or the outsourcing price becoming too costly. Manufacturing insights offers guidance to determine if the manufacturer can make it more cost-effectively in-house.

With aPriori’s platform, one aerospace customer identified $3 million in savings over the lifetime of a part. It gives them a distinct competitive advantage, combating inflation and increasing cash flow. Many aPriori customers also enjoy a COGs savings of up to 5%. The platform’s cost insights allow design engineers to quickly analyze product should costs.

High inflation can be mitigated. Combine your team’s design expertise with a powerful manufacturing insights platform. You will not only combat rising costs but produce a higher value product, improve time to market, and better manage and achieve your manufacturability, cost, and sustainability goals.

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