Tearing Down the Walls

The most advanced companies are using Design for Manufacturability methodologies to develop products that are designed for manufacturability, cost, quality, and the fastest real time-to-market. The accomplish this by using Concurrent Engineering to work together in multifunctional teams to either concurrently design products for existing processing or concurrently design new processing or tooling.

What happens when the manufacture is outsourced to contract manufacturers and job shops? Unfortunately, in most cases, the part or subassembly (hereafter called part) is designed without any collaboration with the CM or job shop (hereafter called vendor) and thrown “over the wall” to the vendor. This at the most reactive end of the Concurrent Engineering Spectrum.

Unless the customer’s engineers thoroughly understands the processes, which is rare, the design will not be optimized for manufacturability and, worse, it will be hard for the vendor to make changes to make it more manufacturable because (a) there is usually no calendar time for changes, (b) there is usually no budget for changes either at the customer or the vendor, and (c) by this point, most changes can not be attempted because designs have so much “cast in concrete” (see graph which shows that 80% of cost is committed by the design). Sound familiar?

VENDOR/PARTNERSHIPS

The solution to this dilemma is vendor/partnerships, in which vendors are early and active participants on its customer’s product development team to co develop (concurrently engineer) the parts they will be building. As part of the team, vendor can help the team design the parts for the lowest total cost and the quickest delivery because:

• Vendors thoroughly understand the DFM rules and guidelines for their process, in general, and for their equipment, in particular.
• Vendors can help avoid arbitrary decisions, which unnecessarily raise cost, delay delivery, and compromise quality. One of the worst causes of arbitrary decisions is styling, especially when the designer throws a pretty shape over the wall to Engineering, which then throws it over another wall to Manufacturing, who then throws it over yet another wall to the vendor ? so the tool maker is three walls away from the designer!
• Vendor/partners will provide the lowest total cost because interacting with the customer’s team results in vendors:
  • thoroughly understanding the challenges and issues
  • making “what if” suggestions early that will maximize manufacturability
  • working with customers early to minimize total cost
• Vendor/partnerships benefit from learning relationships where the customer and vendor learn from each other, thus making each job better and faster.

PROBLEMS WITH BIDDING CUSTOM PARTS

For those who believe in Concurrent Engineering, this logic should be compelling. However, many companies have policies that discourage vendor/partnerships all based on the erroneous belief that they can save money by sending parts out for bid, after they are designed, and then selecting the low-bidder. However, this will not result in the lowest total cost, because:

• Vendors will not help design the part unless paid work will follow. They will need some assurance that they will get some work before they invest their effort to help customers design their parts. Thus, bidding misses out in the biggest opportunity to save cost ? working together.
• Low-bidders may not understand the problem or may be cutting corners, which raises other costs such as quality, expediting, delayed launch, warranty costs, or the costs of recalls (which have been in the news a lot lately).
• Bidders often add a “cushion” to deal with unknown customers or incomplete information: “Suppliers often add a risk premium to their pricing (thus raising the customer’s cost) to cover nondisclosed or unexplored customer requirements or design flaws that may require later adjustments.”
• The customer’s purchasing agents will not be able to help the team develop products, assure availability, and set up vendor/partnerships because they will be too busy managing running the bidding process. The Toyota Product Development System book sums up the cost of bidding as follows: “Searching the globe for the lowest cost means managing very large numbers of suppliers as well as introducing a steady stream of new suppliers into your system. These suppliers are unfamiliar with your requirements and demand a great deal of attention to get up and running. While administering complex contracts, managing global bidding wars, and overseeing the constant introduction of new suppliers into the process, U.S. automakers must maintain mammoth purchasing organization, deal with incredibly cumbersome and slow sourcing processes, and live with constant variation of supplier performance in the development process.” – all to “save cost!”
• Finally, it takes a lot resources away from product development to support bidding (at both the customer and vendor), for instance, to update/change documentation, CAD files, materials, tooling, and processing; complete transfers; and deal with new or ongoing problems related to ramps, delivery, quality, or getting up the learning curve in general. All the above problems are much worse when off-shoring to another continent.

For a complete treatise on all the problems of bidding contrasted to the value of relationships, see www.HalfCostProducts.com/low-bidding.htm .

PRE-SELECTING VENDORS

The book that started the lean production movement, The Machine That Changed the World, notes that in the best lean production companies: Suppliers “are not selected on the basis of bids, but rather on the basis of past relationships and a proven record of performance.”

The bottom line for vendor/partnerships is that customers need to pre-select vendors (and renounce bidding of custom parts if that is in the way) so they will help their teams develop products, as the following leading companies do:

“Toyota selects suppliers early in the product development program, guarantees the business, and incorporates them as part of the extended product development team.”

“At the formal start of the design concept phase, Philips people representing all functions involved in design, manufacturing, and supplier relations, as well as a manufacturing line work and a buyer, meet with their counterparts from the suppliers.”

At Motorola, bringing in vendors into the team has proven to be a major contributor to a project’s success.

Hewlett-Packard’s policy is that vendors should be willing and able to perform all three of the following roles: (a) help design the product; (b) build quick-turn prototype parts and parts for short-run projects; and (c) build production units. Companies should avoid changing vendors as volumes rise because this adds new sources of statistical variation at the worst time for unexpected problems to occur.

So both customers and vendors should be striving to reap the benefits of vendor/partnerships. Customers may first need to abandon counterproductive policies that discourage these relations, such as bidding custom parts and incentives that encourage bidding. Then they need to establish a policy of pre-selecting vendors of custom parts and expecting them to help design their parts, build quick-turn parts, and build the production units. If customers can’t do this as a “leap of faith,” they will have to first launch an initiative to quantify overhead costs, which will then prove beyond a shadow of a doubt that vendor/partnerships do save money on a total cost basis. There are quick and easy ways to do quantify overhead costs; see the article “Measuring Total Cost” by Doug Hicks, CPA, at www.HalfCostProducts.com/total_cost.htm.

Although it is the customer who normally initiates vendor/partnerships, vendors can encourage vendor/partnerships by:

? Offering to help customers design the parts that the vendor will be building, in exchange for the business.

? De-emphasizing bidding work and instituting a preference for working with customers that are welcome to vendor/partnerships.

? Educating customers (using the above points, the books quoted, or the web-sites cited) or recommend customers arrange training on Concurrent Engineering, which should also be attended by key vendors’ representatives.

Editor’s Note: Dr. David Anderson is a California based consultant specializing in training and consulting on Design for Manufacturability, Concurrent Engineering, Build-to-Order, and cost reduction. He is the author of “Design for Manufacturability & Concurrent Engineering; How to Design for Low Cost, Design in High Quality, Design for Lean Manufacture, and Design Quickly for Fast Production.” For more information, visit www.design4manufacturability.com, or e-mail andersondm@aol.com.