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Supplier Costing
A win-win collaboration with your suppliers
results when talks are based on the true manufacturing cost
estimates generated by DFMA.
The overall goal of Supplier Costing is to reduce the price paid
for a part and many different approaches are taken. Quite
frequently, management will establish cost reduction goals and
demand sufficient price reductions from the supplier. These
arbitrary price reductions can leave profit on the table because
they are not based on a thorough understanding of the true
manufacturing costs involved. They can also weaken the supply
chain and risk putting price competitive suppliers out of business,
which is bad for everyone. A much more fruitful and fair
approach is to compare supplier price quotes against an independent
DFMA estimate of the true manufacturing cost. The discussions
that take place after this comparison is made should have the
objective of understanding any differences. DFMA identifies
all major cost drivers for each manufacturing process so that the
important cost related questions can be asked during these
discussions. The DFMA results indicate the true cost of each
step required to manufacture the part so that, during these
discussions, the breakdown of true manufacturing cost is understood
by both sides.
DFMA assists in key areas of Supplier
Costing:
Validate parts in current production
DFMA benefits are realized most quickly when it is used to verify
supplier prices for parts that are in current production. DFMA
true manufacturing cost estimates give purchasing and supply chain
management a unique advantage that they do not have with parametric
cost models that are based on historical price data. For each
step in each part’s manufacturing process, DFMA estimates the true
cost of material, setup, labor, reject parts, and dedicated tooling.
Buy right - up front
Incorporating Supplier Costing up front in your product
development process leads to early supplier involvement.
Suppliers that will eventually be making the parts should contribute
to their design so the parts can be most cost effectively produced
with existing capabilities. However, the choice of suppliers
that are involved early in product development may have a dramatic
impact on the overall cost competitiveness of the resulting product.
For example, it is very unlikely that a sheet metal supplier will
recommend a lower-cost die cast alternative for a series of sheet
metal parts. DFMA can help designers identify the most cost
effective design alternatives so that the right suppliers are
involved during product development and performance objectives can
be satisfied at minimum cost.
Achieve real cost reduction
DFMA helps you understand the true cost to manufacture your
product and helps establish the price you really should pay for
components. Sharing this information with your suppliers
promotes exploration of methods to improve manufacturing efficiency
so that cost targets can be met without sacrificing supplier profit.
It also removes the heavy-handed price reduction demands put upon
suppliers that may not be justified.
A Supplier Costing process that incorporates DFMA can be an
important part of your new product development process and an
immediate benefit to managing your supplier costs.
To learn more about DFMA please click here.
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