“Should Costing provides the basis for continuous cost reduction and waste elimination. Should Costing also provides the ability to formulate the best economies of scale from a cost view point, which can be used to leverage a ‘best price’ in the negotiation process.” – Geometric Limited Should Costing is a systematic process that enables cost reduction from the conceptualization stage through the product life-cycle. Maintaining competitiveness within the aerospace industry is highly dependent on an organization’s ability to reduce product costs and delivery cycle times. However, the industry as a whole continues to face challenges in managing product costs from the inception stage through the very long life-cycle of its products. Aerospace organizations produce complex products that source between 50-70% of their components from suppliers. To eliminate significant costs prior to production, organizations must first identify the major cost drivers of components that are designed, manufactured and procured. Identifying these cost drivers can aid in supplier selection, effective negotiation and advanced segmentation. I sat down with Ken Sutphin, Head of Mechanical Engineering Practices at Geometric Ltd., to explore the benefits that their customers have seen in adopting the Should Costing method. According to Ken, clients that have utilized Geometric’s proprietary productivity tools for Should Costing have enabled: An improved ability to launch new products at target costs. Processes with integrated tools that are almost 2X faster than conventional process with better repeatability and accuracy. Complete recognition and understanding of component …
Read More →The Barriers to Cost Optimization: Manufacturing
Geometric Limited is a specialist in the domain of engineering solutions, services and technologies. I turned to Geometric earlier this week to draw from their expertise and gain a greater understanding of the processes and benefits of cost optimization for manufacturers. I learned that cost optimization is often thought of as a cost reduction exercise, however established products have inherent costs “built-in” to the product. Manufacturers with established products must focus on post-production expenses and work to reduce material costs and manufacturing expenses, while most of the cost structure for the product is already set because of the product specifications and decisions that were made during the development stage. The experts at Geometric advise that by pursuing cost optimization initiatives during the product development stage “companies can create significant cost optimization through better understanding and evaluation of cost drivers across the entire product realization value chain”. There are, however, five potential barriers to achieving full cost optimization during development and these may arise due to the inherent nature of the product development stage. In this weeks infographic we explore these barriers as the first part of our ‘Cost Optimization Series.’
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