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| Cost control is vital to success whether you are introducing a new product or updating an old standby. Costs, however, can be deceiving. Studies show that most companies lock themselves into as much as 90% of a product’s cost during its design and prototyping phases. So, wouldn't it make sense to maximize your profits by getting tight control over your costs before they are designed in? George Lewis, director of solution consulting at Arena Solutions, thinks so, and he will show you how in his breakout session “Controlled Product Data Lowers COGS and Maximizes Profits.” |
| According to Lewis, the key to controlling COGS from the earliest stages of product development is to get your information into one place and then tame it with a modern data management system designed to handle product information and the communication among those who use that information. Many companies try to get their development, manufacturing, purchasing, and supply chain participants involved in design development by emailing them Excel spreadsheets serving as a bill of materials (BOMs). But the ad hoc nature of email “won't cut it,” says Lewis. “Everybody loses important things in their email because those messages that you think you'll get back to later get buried under each new day's message stream.” |
| “And Excel just makes it worse,” adds Lewis. “Excel is a terrific number cruncher, but once you send an Excel BOM out into the world, people cannot resist entering stuff into it their own way. Your spreadsheet data loses all semblance of control as soon as you hit the send key. You end up spending days comparing spreadsheets hoping to eliminate data conflicts and trying to understand everybody's algorithms and product numbering.” |
| A single, managed source for your product data eliminates costly time wasters such as these, yet still makes the data available to everyone simultaneously. By its very nature, a formalized product information system enables you to eliminate duplicate part numbers, establish and enforce standard part and supplier naming conventions, drive obsolete components out of consideration, and also control engineering, compliance, design, and other important documents. The data can be changed by authorized individuals only, yet everyone has their assigned need-to-know access to the newest data affecting their work and informing their decisions. |
| With such a system at the beginning of product development, Lewis says that you can then leverage cost stabilizers – say, standard component pricing and primary and secondary suppliers – early and often. You can proactively engage participants, such as operations and third-party contract manufacturers, as your product develops rather waiting until later when you need them to produce and any bad assumptions are more expensive to undo. And the likelihood that you will overrun cost projections by ordering the wrong part is greatly reduced, if not outright eliminated. |
| Good data, says Lewis, is key to forecasting more accurately and maximizing cost efficiency during product development. Better visibility into engineered-to-order items with long-lead times (which will shut you down if not available when you need them), alternative components, and similar real-world information provides operations and management the critical details needed to do accurate what-if analyses at any time. By way of example, Lewis notes that you can easily compare the technical specifications of two parts with different price structures to see if a less costly alternative will do the job for you. |
| This ability to forecast accurately can be especially valuable when you are investigating version 2.0 of a product or even exploring the idea of a completely new product. Here, better insight into your product data gives you a better understanding of everything from your existing inventory to the capabilities of your suppliers to digital design files that you might be able to reuse in new ways. The cost scenarios used in your investigation will be more accurate when you roll up a BOM with current pricing information from your product information system. |
Accurate product data reliably communicated also makes process-maximizing decisions during the final stages of manufacturing more efficient, especially in the face of rapidly evolving, potentially catastrophic delays. “You can have at your fingertips complete details on alternate components from infrequently used suppliers,” says Lewis. “No frantic phone calls. No nothing. Your product information system can even know the cost of overnight shipping options from their time zone when disaster strikes.” |
“When you have clean, up-to-the-minute product data in one easy-to-get-at place,” adds Lewis, “you and every player in your product lifecycle can make informed, cost-intelligent decisions right from the start of a product’s development. And that lowers your costs and maximizes your profitability.” |
You can hear George Lewis’s presentation on “Controlled Product Data Lowers COGS and Maximizes Profits” at Expandability 2009. George is speaking at 10:30AM on Tuesday May 19th. |
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