The key to manufacturing standard cost reduction is to first identify the cost goals based on the pricing forecast and the company's business financial model. In other words, manufacturing cost reduction is a top-down process. Operations has little control over market pricing and therefore the process has to start with pricing assumptions. Then, based on the pricing forecast and the expected margins, goals can be set for manufacturing cost.
These goals can then be made reality for the business unit based on a manufacturing cost reduction plan that sets out the detailed tasks to be accomplished. Conversion costs must be in line with market expectations and the market is not controllable. The DCI model for manufacturing cost reduction uses the demand forecast as a given, and focuses on controlling the elements of cost that can be controlled:
In highly competitive markets, achieving product cost goals the product of setting the right goals and dedicating the organizational resources necessary to achieve them. If your understanding of manufacturing cost is sufficient (Click to read about our simple manufacturing cost analysis software), then we can help to set out a plan and execute it. If the first step in understanding product cost needs work, we can help there as well.
Beyond that, we can show how improving reliability adds profit directly to the bottom line by reducing cost. Finding the weak links in a design prior to production launch is one very effective method of reducing manufacturing cost and is essential to the 3P process. “Using the process of Highly Accelerated Life Testing (HALT) can reduce time to market and increase the reliability of your product at the time of product launch”, says Mike Silverman, Managing Partner of Ops A La Carte Consulting and Owner of HALT and HASS Labs in Santa Clara California.
Fujitsu's global supply chain management operations determined based on a build versus buy manufacturing cost tradeoff to develop a relationship with a dedicated II-V semiconductor foundry operation. This operation's headquarters was located in the US and the company was establishing a larger operation in Taiwan.
DCI's strategic procurement staff developed and implemented a multi-year semiconductor foundry agreement with a domestic GaAs foundry wafer manufacturer.
Harmonic, Inc."DEHART CONSULTING, INC., working hand-in-hand with our factory personnel, redesigned our manufacturing areas and material flows to enable a 250% growth in output with only a 70% increase in floor space. Additionally, the changes were documented, implemented, and provided a clear path for future expansion."-- Mike Yost, Vice President, OperationsHarmonic, Inc.
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