There is a rapid increase in competition these days and various organizations across the globe sought to create higher value in their automotive products for the customers. This growing competitiveness is leading to customers demanding high-quality products with better functionality, without an increase in price. Therefore, the OEM’s in automotive industry must include projects which are designed to lower the product cost and enhance the value to the customer.
The product’s performance and a major part of its cost are defined in the development stage. To optimize these two parameters, a correct approach of cost management in the product development process is needed.
The Costs to be Targeted for Reduction
A vehicle is composed of complex sub-systems and interfaces. If you are targeting a cost reduction in a complete automobile, it’s imperative to understand the build-up costs involved in manufacturing of the vehicle. The cost build-up in a vehicle begins right from the concepts designed for the simplest support brackets up to the last operation on the assembly line and further till the product is displayed in the showroom.
Some of the costs during this process can be controlled directly and other may require large-scale re-engineering program to keep them low. The total direct manufacturing cost of the vehicle becomes the base reduction cost because there is no engineering control over other components.
The Cost Flow Analysis
The first step in cost flow analysis is to understand how the cost flows inside the vehicle. You may need to identify and differentiate the high cost and low-cost items in a vehicle. The cost flow analysis is used to realize and shortlist areas with the low, medium and high potential of cost reduction. The analysis presents a roadmap for the rest of the cost reduction activities and we can prioritize and target strategic areas of reduction.
Approaches to Cost Reduction
The complete cost reduction approach is multifaceted and involves various variables such as form, fit, function, etc. which have to be considered and balanced. There has to be an outline to systematically evaluate the designs while ensuring a broad level perspective on all the aspects of product development. The various cost reduction approaches are listed below:
- Direct Material Cost Reduction: This can be achieved either by reducing the material from a design or by using an economical alternative. Before opting for material reduction it’s vital to understand the design’s function and analyze how it behaves under load conditions. Then redesign the product using less material and without causing significant change in the component’s form.
When re-designing the existing component using alternate material changes, various aspects of initial design have to be considered. Extensive redesigning and cost reduction has to be calculated considering the changes in the downstream cost components. The change of material must save cost as well as improve the end function of the component at the same time.The third approach for direct material cost reduction is to opt for weight optimization of complex components using FEA (Finite Element Analysis) or to perform FOS (Factor of Safety) analysis on existing designs to identify the areas with more than necessary material conditions.
- Manufacturing Process Cost Reduction: In this approach manufacturability and assembly aspects of designs are involved to identify and evaluate different possibilities to manufacture the same component using alternate process which is cost-effective. This helps save cost by simplifying the overall production process while reducing the lead time. Minor re-designs can lead to better the manufacturability of various vehicle components. This process can be used to improve their end functionality as well as simplifying the overall design. The approach can be extended over to improve and simplify the overall manufacturing process.
- Parts Standard Cost Reduction: This approach brings about standardization in the designs. This means the overall modularity of the systems has to be improved and the part commonization has to be promoted as much as possible in the overall design of the vehicle. Commonization helps eliminate components which would have been fulfilling the same functionality and brings uniformity in operations while reducing the overall costs.
- Supply Chain Cost Reduction: Organizations can outsource their production plants to countries that provide large scale high volume production and cheap labor. This will reduce the landing costs of parts and the manufacturers can also reduce costs by locating the sources near markets or production facilities. The logistic network can be assessed and costs can be optimized by redesigning for improved handling and containerization.
- Cost Reduction through Design Innovation (CRDI):This approach involves redesigning that can trigger resultant engineering changes to such an extent that it becomes a new product development in itself. The investment in this process is huge and has longer ROI period. Thus, though Cost Reduction through Design Innovation is most powerful and must be used judiciously. CRDI can be realized in terms of overall system level simplification. These innovations should target towards a systematic combination of multiple functions which eliminate several others in turn and lower the overall cost.
At Technosoft, we use a combination of various approaches discussed above to carry out a systematic study and redesign of systems and components for on-road as well as off-road vehicles. We have been helping our clients to achieve successful cost-reduction of vehicles used for a variety of purposes.
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