Article featured in Eureka magazine on our approach to product cost reduction, including how the process works and examples of previous projects.
Taking a fundamental approach to redesigning a product can produce enormous savings – dwarfing the type that are usually identified in ‘value engineering’ exercises. The challenge of reducing cost is near the top of the list whenever a product is developed. “Cost is a big issue for people,” says Dan Flicos, managing director of engineering consultancy Sagentia. “But many products are developed in an environment where you are under time pressure to get them to market.” Once a product has been launched, it is then under pressure from competitor’s products – so one answer is to try to make the ‘next generation’ product more cost-efficient. One way is to chip away at the components, delivering incremental cost savings. Sagentia has developed a process – Product Challenge – that takes a more radical approach to cost reduction. It delivers typical savings of 20-40% - but savings can be as high as 70%. “Product Challenge is about taking a fresh look at the product,” he says. “Part of the ‘challenge’ is in challenging the assumptions of the design approach.” It is done by questioning the fundamentals of a product’s specification, technology and manufacture and taking a system level approach to its design. Sagentia has used this approach on many products, with dramatic savings for its client companies. When first introduced, Product Challenge aimed to challenge the traditional value engineering process and extend the lifetime of mature products by improving margins. More recently, Sagentia has seen a step-change in the way this service is used and that is on young products – some less than two years old. Sagentia says that these products may have been rushed to market, so must be redeveloped quickly in order to address compromises in the initial design. Flicos says that the traditional ‘value engineering’ process looks at the supplier base, optimises component cost and aims to reduce costs by a maximum of 5%. This, he argues, only reduces the cost of parts of the design. Product Challenge intends to address the entire design. “We can bring a variety of diverse industry and sector experience and have a broad technology perspective,” says Flicos. “Our teams are made up of highly capable individuals, which enables them to take a more holistic approach and ‘challenge’ the basic assumptions.” He points to an example: one particular product used an accelerometer – a very expensive device that was “totally over-specified for the application.” Sagentia replaced it with a far cheaper piezo device. Part of its ability to do this was that it employs physicists – which many engineering companies cannot do. “By having these people available to work on a project we can find solutions that other teams cannot,” he says. How it works
The process begins with a ‘cost challenge’ review. “We create a cost model for the customer and look at data in different ways – such as cost per function,” says Flicos. There is also a design for assembly analysis, to reduce part count and ease final assembly. This can include solutions such as transferring functionality from hardware to software. Often, components are combined to cut product complexity. A separate ‘performance challenge’ assesses product functionality: could it be made better, but at comparable or lower cost? One beneficiary of Product Challenge was Invensys Metering Systems. It manufactures water meters and automatic meter reading (AMR) systems. It needed to apply AMR to its multi-jet and single-jet meters, but realised these could not provide enough torque to drive its mechanical encoder registers. “For this reason, it wanted a low cost, non-contact means of reading the wheel positions – that was patentable,” says Flicos. Sagentia’s expertise in sensing systems allowed it to develop an encoder solution that was compatible with the entire range of Invensys meters. The company looked at various possibilities before choosing its non-contact (inductive) solution – in which it licensed its own position measuring technology to Invensys. “Invensys produced a meter that was not necessarily low cost, but had more functionality without increasing cost,” he says. Beyond the design Sagentia also advised Invensys on a manufacturing strategy, before setting up high-volume production in Malaysia – “the experiences of which helped us when setting up our own joint venture firstly in Hong Kong and then in Shanghai in China” says Flicos. More than 1 million of the new Invensys units are now made every year. In summing up Product Challenge, Flicos says that it brings a whole new dimension to cost reduction. “This is not just incremental”, he says. “Clients look for payback in six to 12 months.”
