Leading Medical Manufacturer Achieves 25x ROI with aPriori's PCB Cost Optimization

Based in New Jersey, this global leader in the medical device manufacturing supply chain employs more than 70,000 people worldwide. The organization is committed to providing high-quality medical devices and equipment that enhance healthcare providers’ efficiency in delivering care.  

The company’s diverse product portfolio includes high-volume glass syringes, needles, and blood collection tubes, as well as lower-volume flow cytometry systems requiring PCB fabrication.  

In the company’s procurement/purchasing organization, dedicated value engineers and analysts looked to optimize the supply chain and incorporate more data into negotiations and design processes. The primary goal was to effectively “right-size” the company’s costs and value proposition. However, they faced several challenges that hindered their ability to achieve these business objectives. These obstacles included:

Consistent Cost Pressures and Inconsistent Cost Estimations   

The company faced significant pressure to cut costs across its product range, leading to a focus on reducing expenses in the PCB manufacturing process. To address this challenge, it decided to use the design-to-value (DTV) approach and tool from a top consulting firm before using a conventional bottom-up costing method. This new approach provided valuable data that helped the company during supplier negotiations, allowing it to right-size the cost of goods sold (COGS). 

However, the approach struggled to provide accurate cost estimates for highly customized and intricate manufacturing processes. Further, the company encountered a knowledge gap in enhancing these cost estimation processes, causing uncertainty about the potential extent of cost savings. The organization’s senior value engineering manager provided more detail about these challenges by stating:  

The manufacturer’s challenges with managing costs can be summarized as follows:  

• Managing costs for outsourced production. The company struggled to manage costs due to its limited in-house sheet metal expertise and reliance on external suppliers. It outsourced its sheet metal, wire harness, and circuit board fabrication, making it difficult to evaluate, measure, and control costs at the early stages of product development. 

• Lacking detailed cost breakdowns for supplier negotiations. The organization encountered challenges in obtaining detailed cost breakdowns for supplier negotiations due to the high customization levels of its components. The company’s reliance on the consultant’s DTV technology limited its ability to analyze the costs of these customized parts fully. Additionally, the company’s engineers found it difficult to keep pace with market dynamics, such as regional labor rates, due to insufficient technology.  

• Facing inconsistencies with DTV technology. The company determined that the consultant’s DTV tool, which included a computer-aided (CAD) plugin suitable for a value stream-based approach, was suboptimal and required significant manual effort to maintain consistency in the platform.

• Applying excessive pressure on suppliers. By using the consulting firm’s process for PCB production and PCB assembly (PCBA) cost analysis, the manufacturer often estimated costs lower than the actual expenses. Consequently, the company put excessive pressure on suppliers without fully understanding the actual costs of PCB design and circuit board fabrication.

As the contract with the previous vendor ended, the manufacturer conducted a market scan and adopted aPriori’s granular, precise, and actionable cost estimation technology. Here’s how the organization’s engineers harnessed aPriori’s automated, simulation-driven software to propel their ability to produce high-quality products at a low cost: 

• Optimizing manufacturing efficiency with matrix costing. The company used aPriori matrix costing to simulate various manufacturing scenarios within a single workflow. They entered production details like locations, annual volumes (high/low), and batch sizes into these simulations. This method produced detailed cost reports, allowing the company to compare simulations and select the scenario with the lowest fully burdened cost. Further, the manufacturer utilized matrix costing to guide make vs. buy decisions, enhance manufacturing efficiency, and manage mature product lines. 

• Boosting costing accuracy for multiple customized parts. Engineers leveraged aPriori should cost analysis to determine the actual production costs of intricate products and components (e.g., PCBs) with various geometries. They also used aPriori cost models to gain detailed insights into suppliers’ costs, considering factors like materials, labor, overhead, manufacturing/circuit board manufacturing processes, and tooling/facilities.  

• Enhancing negotiation power. aPriori provided the manufacturer with accurate and granular estimates, enabling it to identify cost outliers in its complex product designs quickly. Using this reliable cost data, the company informed supplier negotiations and capitalized on more cost-saving opportunities.

• Mitigating skill and knowledge gaps. The organization adopted aPriori to bridge the skill/expertise gap, eliminating the need to hire additional specialists in PCB and sheet metal manufacturing. Further, the company used aPriori’s actionable design for manufacturability (DFM) guidance to make informed, cost-effective, and high-quality product design decisions from the outset.

The manufacturer’s senior value engineering manager provided more insight into the power of aPriori by stating that:

The medical equipment manufacturer achieved an annual return on investment (ROI) of up to 25 times their investment in aPriori. This ROI remained consistent across different product categories and spend levels, covering several components and manufacturing processes. 

The company plans to continue using aPriori for cost estimation and to negotiate with suppliers, leveraging the platform’s ability to manage various components and manufacturing scenarios. It also aims to employ aPriori to support broader change management efforts across its procurement and supply chain departments.