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Cost Reduction ToolsBoothroyd Dewhurst, Inc.

Boothroyd Dewhurst, Inc.

www.dfma.com

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About Boothroyd Dewhurst, Inc.

What is DFMA.

What is outsourcing and why do it.

The hidden costs of overseas manufacture.

Case Studies:

What we thought in 2004

What is happening today

Brief Software Overview.

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Methodology & databases developed in late 70s

with NSF funding

BDI formed in 1980, first software released in

1983

Founders of DFMA copyright held by BDI

Market leader for nearly three decades, helped

by industrial research & user-feedback

Software in use by more than 850 industrial

corporations

1991 National Medal of Technology

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Design for Manufacture and Assembly (DFMA) is

a tool for early product design evaluation that

simplifies the design concept through part

reduction strategies and predicts assembly and

manufacturing costs. DFMA software helps remove product costs

without compromising function, while improving

quality, reliability, and delivery times. DFMA allows engineering teams to quantify their

ideas and create more-innovative products.

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Copyright Boothroyd Dewhurst, Inc. 2008

Piece Part Costs,

72%

Overhead, 24%Labor, 4%

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Supplier Costing

As ashould-cost tool to provide costestimates, help validate supplier quotes,and to negotiate suppliers bids andcontracts

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motor

2 motorscrews

sensor

2 standoffs -steel - machined

cover - sheetsteel - welded

4 small

screws

base - machinedaluminum

bushing - plastic

end plate -sheet steel

2 bushings -powder metal - brass

Set screw

2 small screws

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Category Part Name Qty Part Num Item Cost ($) SupplierPurchaed Items

Motor 1 616-BDI-03 12.55$ ACME Motor

Sensor 1 109-BDI-03 1.58$ Sensor-Rama

Plastic Bushing 1 279-BDI-03 0.22$ Bushings R Us

Brass Bushings 2 643-BDI-03 1.53$ Bushings R Us

Manufactured Items

Motor Base 1 074-BDI-03 16.38$ USA Machine

Standoffs 2 012-BDI-03 4.87$ USA Machine

End Plate 1 257-BDI-03 1.44$ Joe's Sheetmetal

Cover 1 753-BDI-03 2.08$ Joe's Sheetmetal

HardwareCover Screws 4 975-BDI-03 0.03$ Fasteners, Inc.

End Plate Screws 2 123-BDI-03 0.03$ Fasteners, Inc.

Motor Screws 2 245-BDI-03 0.05$ Fasteners, Inc.

Set Screw 1 097-BDI-03 0.03$ Fasteners, Inc.

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Part Name Qty Part Num Item Cost ($) Should Cost ($)

Plastic Bushing 1 279-BDI-03 0.22$ 0.20$

Brass Bushings 2 643-BDI-03 1.53$ 1.35$

Motor Base 1 074-BDI-03 16.38$ 12.53$

Standoffs 2 012-BDI-03 4.87$ 2.51$

End Plate 1 257-BDI-03 1.44$ 1.38$

Cover 1 753-BDI-03 2.08$ 1.94$

Total 26.52$ 19.91$

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Product Costing

As a benchmarking tool to study yourproducts and/or competitors products byquantifying manufacturing process, materialselection, and assembly alternatives

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Consider the following part

What is the optimal process? Would a change in process result in a

cost savings?

Can we give information to purchasing

that will influence the supplier choice? Would overseas manufacture make sense

from a cost standpoint?

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DFMA output

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Product Simplification

To provide guidance to the design teamin simplifying the product structure,reducing manufacturing and assembly

costs and quantifying improvements

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motor

2 motorscrews

sensor

small screw

base - nylon

cover -injection molding

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63 percent reduction in parts

4 suppliers removed from supply chain 63 percent reduction in detail drawings

74 percent reduction in assembly time

Equal reduction in labor cost

And lets not forget.

46% Reduction in TotalCost of the product

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Main Entry: outsourcingPronunciation: -Out-sOr-si[ng], -"sor-

Function: noun: the practice of subcontractingmanufacturing work to the outside andespecially foreign or nonunion companies

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One alleged bene f i t of Out-Sourcing is alower cost although this c ommonw i s dom may be part urban legend. Only a small part of the value added is the actual

assembly labor.

It takes a lot of folks to create the environment so thatsomebody on the floor can make something.

Most of that cost is overhead.

Overhead costs can be classified in two categories: Fixed volume independent like tooling/equipment depreciation and

other period costs

Variable - dependent directly on the volume like supervision,consumables, and fringe.

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Product manufacture that is to beoutsourced abroad could be kept in the U.S.when three things are done.

1. Quantify the true cost ofoutsourcing.

2. Quantify the actual cost of yourproduct.

3. Use DFMA to redesign yourproduct to enable it to becompetitive in the U.S.

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Current literature covers the problemsw ith outsourcing as a command andcontrol problem.

Higher Costs from reduced visibility and control

Increased Liability from distributed (and dedicated)

inventories Increased Supply Chain Latency due to information

flows that are sequentially cascaded from company tocompany up and down the supply chain.

Higher Financial Risks due to difficulties measuringand monitoring performance outside the four walls.

Loss of Intellectual Property (IP) and competitiveedge if your design information leaks to competitorsor customers.

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Our premise doesnt apply to allmanufactured products.

Products that are 80% labor and 20%material clearly will have a cost advantageby moving to lower labor cost countries.

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Many have heard theSirens song of lowermanufacturing costonly to end up on therocks of reality.

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Outsourcing in a global economy is a complex and multi-faceted issue

China has pegged the Yuan at 6.83 to the 1 U.S. dollarsince 1994.

Federal Reserve Chairman Alan Greenspan commentedthat if China were to let its currency float, it would

weaken the countrys banking system and threaten theworld economy.

Lack of job creation in the U.S. is in part due to gains inproductivity

Forrester Research predicts 3.4 million white collar jobswill be shipped offshore by 2015.

Many of these 3.4 million jobs are Business ProcessOutsourcing (BPO)

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Travel

$4000 - $6000 per flight (round trip business class)

$172 per diem (average for China from StateDepartment, commercial rate is higher)

Loss of two entire days for travel time. Travel inside China on Dragon Air is a must!

Time zone difference

13 Time zones between US and China

A day of lag time occurs due to time difference

Makes non-written communication very difficult

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Every year more than a 100 million containers cross the oceans

Each year more than 10,000 containers fall overboard

1990 80,000 Nike Tennis shoes in Mid North Pacific Ocean

1991 414 drums of Arsenic near New York

1992 29,000 bath toys ducks, frogs, turtles, beavers

1994 20,000 Boltio sandals

1994 34,000 hockey gloves

1997 500,000 cans of beer into Pacific

1997 5 million Lego plastic pieces

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Finding a vendor

Usually done through a third party

Costs for this service vary widely Make sure the tour matches reality

Appropriate selection paramount to success

Dont under estimate time and expense of thisprocess

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Language and History

Principal of Guanxi or Relationship

Connections based on mutual trust, trading favors and sharedobligations. Extensive networks. Guanxi networks create trust

among fellow Chinese and create barriers to outsiders.

Legal Climate

Western businesses approach relationships with standard contractrevisions and alterations. Commercial law is ingrained in our

thinking. Traditionally in China commercial law barely existed,obligations come from relationships.

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40 HiCube External Dimensions 40 x 8 9 x 6

Internal Dimensions 39 5.375 x 7 8.625 x 8 10

Typically container cannot be packed 100% full. Typical

container can be loaded to 85% capacity. 2300 feetcubed.

Time on the water is 3 weeks. Time in port outboundand inbound as much as a week at each end.

Costs $4500-$5500 depending on departure and arrivaldestinations

Air freight is currently $8.50 per pound (5 to 40 lbs).

Shipping by air is VERY expensive!!!

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The U.S. Department of Labor Statistics publishes

International Comparisons of Hourly Compensation Costsfor Production Workers in Manufacturing. The last reportis USDL 03-507, September 2003.

Data is adjusted and mathematically modeled to be an

apples to apples comparison:

Country Hourly wage in (U.S. $) 2002 yr.

United States $21.33

Hong Kong $5.83

Singapore $7.27

Taiwan $5.41

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Typical labor rates

Rates vary at less than $1 per hour for unskilled

Skilled 0.50 cents to $3.00 variance

Many companies included 2-3 meals a day & a bed in

dormitoryHow long is the work w eek?

Work week is 12-14 hours per day, 6 days a week.The seventh day off is usually because of powerconservation.

Skill level

Most labor is unskilled staff from rural areas.

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Material cost differences between US andChina

Some materials are actually moreexpensive abroad

Lower quality materials available in some

cases

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Numbers set forth in 2004 and reviewed for this presentation to ensure they were still valid

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Product:

M ilwaukee inch dri l l, Model 0238-1

Redesign to create Model 0299-20

Then redesign Model 0299-20 using DFMA

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Change the gears from being machined from forged blanks to being made from

powder metal (saves $10.07 per unit)

Replace the roller ball bearings with powder metal bushings (saves $0.99 per unit)

Change the side handle back to the 0238 design, where it is simply threaded into

the gear case (saves $1.82 in material and $1.18 in labor)

Remove two screws from the gear casing and use two long screws through the

back of the handle to hold the gear case to the handle body (saves $0.14 per unit)

Mold in the nameplate and laser etch the serial number (saves $0.25 per unit)

Mold a feature into the drill body to hold the chuck key and eliminate the separate

part currently used to hold the key (saves $0.28 per unit)

Considering all of these savings together, thereare potential DFMA savings of $13.55 in materialcosts and $1.18 in labor.

DFMA redesign ideas:

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0283-1 drill cost 100.03$

0299-20 drill cost 92.59$0299-20 DFMA Redesign 77.86$

0299-20 drill cost (China) 63.62$

Cost summary for original and redesigned dril l:

Numbers in 2004 dollars. All of the cost numbers provided here have been altered to

protect the confidentiality of the information supplied by Milwaukee Electric Tool.

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Total cost to manufacture in China is $63.62

Add the cost of outsourcing, or 24%, for a total of

$78.89

DFMA redesign cost in the U.S. is $77.86, sooutsourcing results in a cost increase of $1.03.

Cost including outsourcing:
http://www.mercurymarine.com/

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40 potential leak sites galvanic, crevicecorrosion

Susceptible to corrosion - 7 different metals

Tremendous amount of machining

Extensive component assembly, and serviceissues

Labor intensive installation - 9 hoses installedwith hose clamps

Aluminum anodized and protected by 4 paintcoatings with Hazardous Air Pollutants

Two Paint layers contain Cr+6

Fuel vapors released to environment uponheat soak

Complex end-of-life disassembly and recycling Extensive, Asian supply chain due to

number of materials and sub-components w ith l ittle integration

Commonality with other outboards difficult

Slide courtesy of Dr. Kevin Anderson, Mercury [email protected]
http://www.mercurymarine.com/http://www.mercurymarine.com/

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Functional Integration Corrosion Prevention

Environmental Responsibility

Design Processes Lean Design

Safety Critical Design

Design for Six-Sigma

DFM and DFA

http://www.mercurymarine.com/http://www.mercurymarine.com/

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Eliminated 31 leak paths, galvanic and crevicecorrosion.

Corrosion resistant- polyamide and stainless Minimal machining- only 1 reamed hole Simple component assembly Integrated quick connect fittings Environmentally Friendly

Uncoated, no toxic metal finishingprocesses required

No Cr+6 or toxic materials 75% less evaporative fuel emissions Fewer materials simplifies end-of-life

recycling Increased reliability due to corrosion resistance

and part reduction

Cost-effect ive, short U.S. supply chaindue to simple elegant design andexcellent material and process selection

Component platform approach 1.0 Kg weight reduction (35%) 13% cost savings

http://www.mercurymarine.com/

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Five year implementation of DFMA

resulted in higher profits and strongbusiness model of US competitiveness.

Warranty cost per unit declined 75percent.

Labor expenses decreased by 70%. Case study proves that design

simplification is fundamental and

highly effective strategy for negatingthe effect of cheap foreign labor.

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What can we discover about this part that would

be useful in understanding the true costs ofmanufacture and the true costs of outsourcing?

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Questions?

See www.dfma.com for more information
http://www.dfma.com/http://www.dfma.com/

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