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Less different components in a product can save €1000 per year per component on overhead costs

Created: 5 October 2018

Most organizations tend to bring back inefficiency over time, primarily by driving out costs. The main area of focus here is bringing down the piece price of components. Another strategy, easily overlooked, would be limiting the number of different components in a product; this can save €1000 per part number per year on overhead costs.

Consider which activities are needed for each component in a product. In the design phase, Engineering must specify each component and create a component number in the ERP system. The next steps would be cost price analysis, supplier selection and contract negotiations.

Once a component number is in the ERP system, there are costs that will keep on coming back annually: maintaining contacts with suppliers, continuing to search for alternative suppliers, negotiations with these suppliers, determination of order size, calling of orders, processing payments. There will be cost of capital regarding stock, transport costs, receipt checks, stock location warehouse, control stock size, quality control, handling of disputes, internal transport, stock location in production, stock location for service components and possible use of special (assembly) tools.

All in all, enough reason to put emphasis on limiting the number of different components in a product. But how do you do that?

Leave out components

First should be assessed what the added value or function of each component is in a product. Reconsider what the costs should be for the function of the component and whether the customer or end-user will appreciate this value. The best moment to investigate this would be the design phase or with a product change before making investments in tools.

Standardization / use less different parts

A simple example is the standardization of fasteners. Try to limit the number of different fasteners in a product. This saves assembly time by using less different assembly tools. The design of the product for ease of assembly or ‘Design for Assembly’ is one of the two methodologies in DFMA. DFMA stands for Design for Manufacture and Assembly. For the parts that are necessary, try to use standard of the shelf parts. This makes specification by engineering and the purchasing process simpler and cheaper. Example: use a standard connector for different products.

Integrating components

Design for Manufacture means the design for ease of manufacture of the parts that will form a product. This does not have to be contradictory with efforts to reduce the number of different components in a product by integrating components. Example: integrating lid and box.

Integrating lid and box:

or

 

 

In summary it can be said that attempting to drive down costs by reducing the piece price of components is a valid strategy. However, there are other ways to achieve a cost down. An powerful approach to limit costs is to decrease the number of components in a product. Less components means less costs, hence a better margin.

Want to know more about cost-effective product design? Mail us at info@tarlunt.com

Roger Verheijen

Source photos: munro & associates inc., assetresolutions.nl, dozen.nl and biopack.be