Turning Cost Management into a Competitive Advantage
Cost Management can be challenging for any company, especially those companies smaller in size — take for example a family owned and Canadian based manufacturer of harvesting equipment. They specialize in the production of pull-type and self-propelled windrowers as well as specialty and pick-up headers for combines. Serving global markets, their disc, auger, and draper products help their customers harvest a wide variety of cereal grains, oilseeds, grass seeds, rice, soybeans, hay, forage and specialty crops such as peas, lupins and lentils. They pride themselves on making harvesting easier and helping their customers be more productive with their specialized harvesting equipment, earning a reputation for high quality and reliability. Within their corporate quality objectives, they promote their ability to be prudently cost aware and cost effective in all aspects of the organization in order to provide a strong value proposition for themselves, their dealers, and their customers.
They are very proud to deliver on this. However, several years ago, in 2009-10, cost was more of a challenge. They did not have a reliable system to determine cost. If two parts looked similar, they assumed each cost the same which was not always the case. Design engineers did not have any confidence to cost a part and there would be a week delay getting any kind of cost estimate back. This was problematic as it was too slow to provide needed guidance on cost. Even more important, they needed to see cost trends. They needed cost standards to establish a target and use that as a basis to know if costs were trending up or down so that they could better manage cost. They just didn’t have a good way to do this
Now, after implementing the Product Cost Management solution from aPriori, all of that has changed.
They can now run a part through aPriori and develop standard costs. “With this information, we now have victories in cost reduction,” says a Design Cost Engineer at the harvester manufacturer. “Cost variants are now exposed so we can act on them. There have been times when we have gone back to the part design and reduced the cost by 25%.”
However, he considers acceptance as one of their biggest results. They have been able to validate the costs coming from aPriori so now they can use those results to establish cost standards. Says the Cost Engineer, “This has been a huge benefit because before, we had nothing that was reliable.”
They are also seeing benefits with purchased parts. “Now we can run current parts through aPriori, and hand over the results to our purchasing department,” observes the Cost Engineer. “When the supplier sends back the quote, we have something to compare it to and know if it is too high.”
Another success has been with their paint system. They are now able to identify how much paint is needed and what it will cost to paint it. With that knowledge, they have visibility to the cost of painting and can drive cost out there too.
For those considering an implementation of a product cost management solution, the Cost Engineer offers some advice. “There has to be a couple of people involved who can do the homework up front. These people can be the super users,” suggests the Design Cost Engineer. “You should also be prepared for a shift in culture for your design engineers so that they embrace costing as part of their role.”
This harvesting equipment manufacturer has done this so well, they can now promote their cost conscience culture to their customers. Their customers in turn know they are working with a company doing everything it can to deliver top quality at a great value.