How iRobot Maximizes Supplier Negotiations With aPriori Cost Modeling
iRobot embarked on a transformative journey by adopting aPriori’s cost modeling and estimation software. This case study examines how iRobot overcame initial adoption challenges and ultimately achieved success by implementing best practices in cost estimation.
Discover how the innovator customized aPriori to implement a bottom-up strategy in analyzing cost drivers and negotiating with suppliers.
Robotics and Consumer Products
Number of Employees
The ProblemIncorrectly utilizing aPriori led to its perception as a benchmarking tool rather than a true should cost modeling solution
The SolutionAchieving cost estimation excellence by configuring aPriori and implementing best practices, fostering precision and better bottom-line outcomes
Who is iRobot?
iRobot is a leading robotics company that designs and manufactures robots, empowering consumers to do more inside and outside the home. Its impressive product portfolio includes iRobot OS Home Intelligence, Roomba vacuum cleaners and mops, and air purifiers, providing customers with diverse experiences.
The organization is headquartered in Bedford, Massachusetts, and has more than 1,100 skilled employees globally, known as “iRoboteers,” across Europe, the Middle East, Africa (EMEA), and Asia-Pacific (APAC) regions.
Problem: Limited Understanding and Underutilization of aPriori Cost Modeling
iRobot originally used a homegrown cost engineering tool and Excel spreadsheets to evaluate the total cost structure of a new product. However, these traditional tools were time-consuming and prone to errors, leading to unsatisfactory results.
To address this issue, iRobot adopted aPriori as a research and development (R&D) design resource for an injection molding module. The aim was to focus on design to cost (DTC) and Value Analysis/Value Engineering (VA/VE) processes for new product introductions (NPIs). Additionally, aPriori’s data-driven and actionable insights would assist in initiating fact-based negotiations for operations and sourcing.
Unfortunately, iRobot could not effectively implement aPriori’s cost modeling technology, leading to imprecise and unquantifiable outcomes that caused a loss of confidence in the solution. Moreover, iRobot’s internal culture was not conducive to adopting new software, relegating aPriori to be perceived as a benchmarking tool rather than an advanced costing technology.
After an internal evaluation, iRobot decision-makers recognized that they were not utilizing aPriori’s automation-driven cost modeling tool to its full potential. The company already had the right technology and capabilities to estimate costs accurately and quickly with aPriori.
As a result, iRobot decided to relaunch aPriori and adopt a challenger mindset focused on profitability. This enabled the company to reduce costs and gain an edge over new competitors entering the robotic vacuum cleaner market.
During the relaunch process, iRobot identified the shortcomings of its initial aPriori adoption and implementation. The organization realized that:
- The solution is not as simple as loading computer-aided design (CAD) files and waiting for accurate cost estimates
- Stakeholders need to identify their problems and goals precisely before achieving results
- To achieve cost estimation accuracy, one must make the right assumptions, gather relevant data, and understand where to use should cost calculation
Solution: Leverage Cost Modeling Best Practices for Greater aPriori Adoption
iRobot perceived aPriori as a benchmarking and R&D design tool, but it has proven to be much more. The aPriori solution enables the manufacturer to:
To take advantage of these benefits, the iRobot team incorporated cost modeling best practices to relaunch the utilization of the aPriori platform. Five distinct strategies group these best practices:
1) Configure aPriori to Meet Internal Business Needs
iRobot has unique demands and obstacles that require a tailored approach to using aPriori’s cost modeling solution. The manufacturer evaluates the effort it can allocate to developing its database and training relevant stakeholders to employ aPriori effectively.
The aPriori expert services team is crucial in helping iRobot seamlessly integrate and utilize the platform. They provide demos and in-depth training on aPriori solutions and set up user-defined attributes (UDAs) for material identification in CAD.
2) Crack the Supplier’s “Black Box” to Identify Cost-Saving Opportunities
iRobot had difficulty comprehending a supplier’s total cost calculation due to the lack of breakdown of individual product components.
After analyzing the situation, iRobot discovered that various factors impeded its ability to examine costs more effectively and engage with suppliers. These factors included:
- Having inaccurate expectations and inadequate knowledge of how to use aPriori cost models
- Expecting immediate, precise results from aPriori without considering the need for customization, which resulted in a loss of confidence
- Focusing solely on the overall cost of a component without considering how it was calculated
- Relying on ineffective negotiation approaches
To address these issues and improve cost estimation, iRobot made the following changes:
- Redefined how to use aPriori to meet its current needs
- Customized aPriori’s database to fit its business model and created specialized digital factories for different suppliers
- Utilized cost models to challenge suppliers’ costs based on facts and assumptions, prompting them to reveal their costing structures and technical parameters
- Relaunched training programs to improve understanding of the company’s software, calculations, and databases
- Modified negotiation strategies from total cost to cost driver comparison
3) Maximize Cost Driver Awareness for Stronger Supplier Relationships
iRobot employs a new bottom-up approach with aPriori to identify cost drivers, assess each expense contributor, and facilitate fact-based discussions with suppliers (Figure 1).
aPriori estimates are highly precise and based on various real-world factors, such as raw materials, labor costs, production expenses, and more, across 87 regions worldwide. These estimates help manufacturers like iRobot improve procurement decision-making and capitalize on cost-saving opportunities when sourcing components from suppliers.
4) Improve Cost Estimation With Continuous Learning and Data Integration
iRobot can employ aPriori’s cost modeling solution to assimilate data from supplier interactions. The manufacturer frequently visits suppliers to gather data about their direct and overhead expenses, tool shop rates, and more. This iterative approach ensures that iRobot remains up-to-date with the latest information from its suppliers.
This information is then added to aPriori to pinpoint significant gaps between supplier prices and the estimates generated by the platform. This strategy can help iRobot in various ways, such as:
- Ensuring that aPriori mirrors the latest and most accurate data for cost estimation
- Gaining a better understanding of supplier cost structures
- Streamlining future cost analysis and supplier negotiation processes
- Identifying hidden factory costs and additional opportunities for cost savings
5) Focus on Product Development Optimization
iRobot collaborates internally with R&D and product development teams to optimize new designs for cost and value.
These best practices can help other global innovators achieve similar results in their product development process, from design to manufacturing and procurement.
Results: Realized Nearly 10% Savings With Cost Driver Comparisons
After relaunching aPriori, the NPI team at iRobot successfully introduced innovations at the right cost the first time. They achieved cost reduction excellence for the following products:
- Clean Base® Auto-Fill Dock. This sizable dock automatically empties debris bins and fills the water tank for autonomous cleaning. To optimize the cost of its plastic parts, iRobot uses a cost driver approach and aPriori’s precise should cost estimates to identify gaps in the supplier’s original quote. As a result, iRobot has achieved a reduction value of $7.5 per unit, equaling 15%. With lifetime volumes expected to reach 200k, iRobot anticipates savings of $1.5 million.
- Roomba Combo®. This robot vacuum and mop is one of iRobot’s widely known floor-cleaning innovations. The manufacturing process for Roomba is more complex than that of regular injection molding, and due to this complexity, suppliers began charging iRobot high prices. To counteract this, AJay Verma, iRobot’s Sr. Cost Engineering Director, personally visited suppliers and learned about their service, setups, tooling capabilities, and plastic processes. iRobot then used these parameters to create a highly precise cost model in aPriori. In the end, iRobot saved 9.61% in the first round of negotiations while reducing the new product launch cycle time.
- Front-End Innovation (FEI) Projects. iRobot’s FEI approach involves ideating and evaluating the potential of a new product before its actual production begins. aPriori supports the company’s FEI strategy by enabling it to explore new mass production technologies within the platform while revisiting previously shelved and costly design concepts.
Hear more about how iRobot transformed aPriori’s role from a specialized R&D tool to a versatile solution that improves cost engineering and supplier management:
What’s Next for iRobot?
iRobot has announced its plan to employ aPriori’s cost modeling solution to achieve “Zero RFQ.” With aPriori, iRobot can bypass the arduous, time-consuming request for quotation (RFQ) process by directly sending purchase orders to suitable suppliers. Moreover, aPriori will enable iRobot to understand the expenses of its products even before creating the RFQ.