Within business, constant attention needs to be given to cost structures. Even companies with a good history of profit margins continually target areas where they can further streamline costs. The increasingly competitive marketplace, shrinking product development cycles, ongoing leaps in technology, changing taxation policies, and environmental sensitivities compel organisations to continually drive down their internal costs.
However, the scale and complexity of their industrial processes make cost reduction with quality retention difficult to attain. Most companies introduce cost-savings plans in the early stages of their product development cycle but implementing cost-saving measures along the way to achieve financial targets can be a struggle.
Overcoming common impediments to cost control
One factor affecting their efforts is shifting consumer preferences. At times, trade-offs between features and product cost become essential. Making such adjustments can be even more intense in a competitive marketplace where customers have a myriad of options and upgrading a product to incorporate a new functionality can significantly increase manufacturing costs.
One common problem is that organisations may adopt a siloed approach to cost control and reduction, with different targets for design, manufacturing, and supply chain teams that may not fully align with the broader business strategy. Disparate processes such as enterprise resource management, customer relationship management and product life-cycle management are also contradictory to total cost and quality control.
However, some product design and system engineering consultant firms offer customised solutions for cost control in manufacturing. Partnering with these specialists enables product developers to reduce operating expenditures and accelerate time-to-market, while retaining and often improving the quality of final output.
What matters most is the experts’ ability to understand the unique challenges faced by organisations in various industries, and to deploy appropriate cost-reduction strategies while also fulfilling market goals.
A holistic approach to cost optimisation
Partnering with engineering experts that have comprehensive product development knowledge spanning design, manufacturing and supply chain optimisation can help businesses to trim down the costs associated with the development of a new product or the tailoring of an existing product to new locations.
A multidisciplinary product engineering framework is vital for cost-optimised design and development. The concepts must be validated from design-to-manufacture, design-for-assembly and design-for-reliability standpoints. The next step is to deploy advanced simulation tools in computer-aided engineering systems for further design optimisation. A suitable engineering partner should also support its clients in developing and testing prototypes.
Value engineering is a common approach used by experts to bring down design costs and better manage materials costs. Using alternative materials, methods and technological processes can reduce product costs without compromising on functionality.
Product modularisation is another way that engineering firms can help manufacturers emerge as process innovators. This method simplifies engineering workloads across multiple products, sites and product lines. Here, product development costs can be optimised at floor level by using appropriate techniques to ensure sub-systems and functionally independent product modules can operate in tandem.
Advanced analytics, backed by big data and the Internet of Things, are also enabling cost optimisation for manufacturers. This practice is used to drive predictive maintenance, helping companies foresee, diagnose and solve potential problems in their operations before they occur. Key benefits of predictive analytics include reduced unplanned downtime, improved asset utilisation, better production quality, and lower maintenance costs.
Once cost reductions are achieved and organisations are seeing an increase in their profit margins, these can be passed on to customers in the form of lower prices, thereby boosting demand.
Product cost optimisation also has long-term implications along the value chain. By collaborating with an experienced design, build, operate and maintain partner, enterprises can fundamentally innovate their engineering and manufacturing functions in order to adopt ideal practices for cost reduction.
Written by Bhaskar Ramakrishnan, Senior Project Manager – Industrial Energy and Natural Resources, Cyient.