Design-driven cost reduction has four cornerstones:
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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.
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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.
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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.
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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 (koehler_christian@bah.com) 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 (weissbarth_robert@bah.com) 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.
