Design-driven cost reduction has four cornerstones:
Process discipline is imposed at every stage: idea generation, evaluation and prioritization, and implementation through production. Each step has an expected duration, and every idea is tracked. A highly disciplined approach to validation and implementation ensures that the cost benefits are realized in the shortest possible time.
Target setting and transparent reporting add to the discipline. Targets for cost reduction are derived from competitive benchmarking, component by component. Suppliers play a valuable role here in assessing cost differences. Transparent reporting ensures that deviations from targets are quickly corrected.
A cross-functional organization that removes organizational barriers — physical and cultural — is essential to fostering collaboration. Soft management issues, especially culture change, play a vital role in reducing natural conflicts among engineering, purchasing, and marketing.
Management commitment empowers design-driven cost reduction teams to make and implement difficult decisions. Key supporting management roles include setting targets, reviewing progress, removing roadblocks, and supporting critical decision trade-offs among product cost, weight, performance, and functionality.
Design-driven cost reduction is not a panacea. But it is a powerful management resource to help companies realize better margins — not at the expense of their suppliers and customers, but through better design that benefits everyone.
Christian Koehler ([email protected]) is a principal with Booz Allen Hamilton in Amsterdam. Mr. Koehler focuses on strategic transformation, supplier integration, and design-driven cost reduction. He advises automakers and suppliers, and has worked extensively with high-tech companies.
Robert Weissbarth ([email protected]) is a principal with Booz Allen Hamilton in Düsseldorf, Germany. Specializing in the automotive and aerospace industries, Mr. Weissbarth focuses on purchasing and sourcing, engineering, and strategy.