high mix manufacturing

Manufacturing Cost Reduction

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, Operations Harmonic, Inc.

Manufacturing Cost Reduction

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.

  • Production cycle times
  • Supplier partnerships
  • Inventory levels
  • Outsourcing - sources and extent
  • Non-value added processes
  • Procurement and material acquisition costs
  • Factory Utilization rates
  • Waste Reduction
  • Reliability Improvement
  • Alternative material selection
  • Quality management and control
  • Logistics Costs
  • Warehousing efficiencies
  • Manufacturing Execution Systems

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.

  • Production Cycle Times +
    Cycle time, also called throughput time, is the amount of time required to produce a product or service. This time includes all production processes including value added time and non-value added time.
  • Inventory Levels +
    Inventory in general, and work-in-process inventory levels specifically can contribute to higher manufacturing costs.
  • Non-value Added Processes +
    Non-value added processes include: inspection time, move time, wait time and waste. Non-value added processes include any process in manufacturing that does not add value to the customer.
  • Factory Utilization Rates +
    The factory utilization rate relates the actual number of units produced by a plant during a time period to the number of units that a factory can produce using the existing capacity. Maximize factory utilization rates to increase profit per unit.
  • Reliability Improvement +
    Simply put- when you increase your factory's reliability, you increase your production. Increase your production and you increase your company profit. Reliable factories operate at lower costs.
  • Quality Management and Control +
    Quality management focuses both on product and service quality and on the means to achieve it. It has four main components: quality planning, quality control, quality assurance, and quality improvement.
  • Warehousing Efficiencies +
    Getting on top of warehouse efficiency metrics is very important and inventory cost issues can drain an outwardly healthy business. Receiving, stocking, inventory-taking, order picking, and order cycles should be considered as a continuous improvement process.
  • Supplier Partnerships +
    Strong partnerships with key suppliers are intended to bring down Total Cost of Ownership for materials through rapid and relevant communication of goals.
  • Outsourcing - Sources and Extent +
    Develop a target cost strategy for the acquisition of offshore materials and analyze the make-buy decision framework for the outsourcing of materials and sub-assemblies.
  • Procurement and Material Acquisition Costs +
    Reviewing Materials Management and Planning, Supplier Quality Engineering, Inbound Freight and Duties, Receiving and Put Away, Incoming Inspection, Material Process and Component Engineering and Tooling will all lead to costs that can be controlled.
  • Waste Reduction +
    Removing any cost incurred that does not benefit the customer.
  • Alternative Material Selection +
    DCI can help to engineer new solutions to existing products by exploring to use of lower cost materials for specific applications.
  • Logistics Costs +
    Review the costs incurred end to end in moving a product from the raw material stage to market delivery.
  • Manufacturing Execution Systems +
    Review current implementation and or recommend software solutions that connect, monitor, and control complex manufacturing processes within your factory.