Q&A – Cost and Value Engineering

Q. Why don’t we start with a brief flavour of your background and your teams as well internally?

In terms of background it can be maybe not so widely known as a capability, so typically because of, maybe not a direct journey into this career and this skill set, there are a number of different areas for both myself, and the wider team have in terms of background, that led us to this journey. So typically, we’ve covered four major backgrounds, between us all.

Specifically, within my history and background, I started out within technical engineering and then spent a number of years in a number of different financial roles and that ultimately allowed me to bring both technical background and expertise together with understanding cost and finance. That sort of then morphed into the understanding and realization of how you can affect cost from a design lens and then moving into the world of cost engineering at a product level, but then looking at cost engineering on an operational level.

If we look at sort of my wider team, we’ve got lots of people who’ve worked in pure engineering roles, manufacturing roles, operational roles, but also finance roles. So, you know, there’s a great deal of experience and varied background in the team that allow us to point to different areas of cost, that we can tackle when we’re fulfilling this role and helping leverage this capability to deliver value to our clients.

Q. What, in layman’s terms, exactly is cost and value engineering and how can it benefit a company?

 I think there’s a couple of different facets that we can apply from a lens point of view. But ultimately, there are many ways to tackle costs and obviously, a large part of what we do as an organization is look at procurement and supply chain costs.

Now, that’s well known and understood. Where we differ from applying some of the levers that our procurement and supply chain colleagues do, we look at cost with a more of a technical lens.  We can look at products, look at specifications of products, look how they are designed and how they are manufactured, and understand all the specific cost drivers, at the product level. Therefore, if we understand what the levers are, we can understand how to affect them to lower them so to bring them down.

An example of that, we might be looking at a product that’s got some particularly tight tolerances, which in our world we would look at and think, well why do we need such a tight tolerance on, sort of an A to B dimension or an outside diameter, because that’s going to drive in additional process costs. What can we do to affect that? Can we look at alternative materials as an example as well?

If we’re looking in the world of say aerospace as an example, there’s lots of rare and exotic material used. Now, one of the things that we’ve found throughout the years delivering projects to clients, is sometimes there are alternative materials that we can use that fulfil a similar or the same sort of role as incumbent material, but it can still be fit, form and function for the purpose of what we’re needing that to fulfil.

So that’s very much at the product level where we look at cost, but then we can move up a level and look at manufacturing or operational cost, because if we understand all of the steps in the dance to build up a unit cost of a product, we can then look at areas of operations and cycle times as an example.

If we are witnessing a specific high cycle time on one of the operations in manufacture, we will look at methods that we can use to help bring that cycle time down, therefore to lower cost. If there are certain operations that bring high levels of scrap, and therefore have scrap costs building in total overall cost, what can we do to sort of alleviate that?

So, there are a number of different operational lenses and levers that we can pull to help tackle that cost problem.

Q. If I was to look at a product that I have, or an operation, do you have the ability to look at the carbon footprint of their products as well and their overall supply chain? Do you and your team have the techniques to look at that carbon mapping?

Yeah, absolutely. So, this is an area that we’ve invested in quite heavily over the last 18 months or so.

Typically, a lot of the solutions on the market when looking at carbon, they will look more at a manufacturing site level, and potentially take utilities spend and help map scope one scope two carbon emissions.

Now because there are a lot of people playing in that field, we specifically wanted to look at carbon down at the product level. We really wanted to understand, how we can look at carbon as a digital twin with cost to help our clients and empower our clients to make informed decisions, that can affect that onward supply chain design.

If for an example, you were buying a product, it’s costing you 10 pounds out of China that might come with a five kilogram CO2 equivalent value. Whereas you could buy a similar or same product from a lower cost European country at a slightly higher cost, maybe 12 pounds, but it will have a lower CO2 equivalent number attached to it.

That enables our clients to make that decision on, you know, do we take the cost benefit or the CO2 benefit?  How can we use that to help effect future supply chain design, with that carbon impact lever, that we’re going to have to start to pull more and more as we reach 2030 and the various time frames for different industries to help reach net zero.

Q. In terms of the benefit to companies, what are the typical levels of benefit I could expect if I was looking at a product or component levels?

There’s lots of variability here. Typically, we cover all of the major commodities within manufacturing, so with industrial products or the world of automotive or aerospace and defence.

That could be stamping, forging, casting, what have you. What we can typically expect to deliver would be anything between sort of 5 to 40 percent. Now there’s lots of variables there within, so different volumes and different industries as well, and that would typically be on legacy products. And it can vary from industry to industry.

You might have more opportunity in a volume world, in terms of being able to extract more value because you’re working in more of a competitive market space. So, you can bring in that challenge of competition within the supply chain. When you’re down at the lower end of the volume spectrum, sometimes it can be harder.

Now that’s for legacy. When we apply the tools and techniques in a new product introduction, new product development world, then we could yield much greater benefits because we can affect the design decisions before the parts are in production.

We had consistently delivered up to 75, 80%, cost reduction from original inception of a design through to serial production, but going through design for manufacture, design to cost, design to assembly techniques to ensure that we don’t bring products to market with excess cost attributed to them.

Q.  So, you also looking at design for assembly, design for manufacture as well?

Yes, absolutely. So, as we look at just products and the levers that we can pull there, a lot of the cost embedded within the total cost of ownership, or the total cost of a product will be within how the sub products are pulled together and assembled. How we can streamline that, how we can look at the different ways that the products are manufactured.

Now there are some of the tools and techniques we can use here on different levels of automation. There are software solutions out there that we use to help understand how we can affect, for example, cycle time.

As an example, how can we streamline an assembly process to either take head count or cycle time out of that process to help achieve cost down, within that total cost lens that we will be applying.

Q. How would a client typically start given the quite focussed tool sets and experience you need? If a client has a complex product, database and so on, where would they typically seek to start this work?

I think if you do not have this capability already, the place that we typically will always start will be to tackle the direct spend. We do a pareto of the direct spend and we typically look at it as a commodity lens. Or we can look at it from a supply lens, so where are your biggest spend items? Where do they sit?

So then in the example that we typically would run through we might, if we apply the commodity levers, build some sort of high-level estimate for a sample set within say, the casting, the stamping, the forging, maybe the PCB A, so the big spend items within your direct spend. That’s the first round of evaluation, we will identify where we believe the greatest opportunity stand.

From this we might find an average gap within casting at, say 20%. Whereas the average gap within PCB As might only be 5%. So, we will focus our effort where we believe the greatest benefit or return is likely to reside.

So that’s typically what we would do. We would want to get the best coverage that we can on the direct spend and then work down in terms of where the greatest benefits land at a commodity level.

Q. Just paint a picture of the future. With more data being available, augmented reality, AI and more advanced software solutions, where do you see the future of your function?

So obviously AI is a capability that’s emerging and something that’s absolutely affecting the cost and value engineering community.

Capabilities such as CAD to cost, so dropping CAD files into a system that then can manipulate these CAD files to understand the manufacturing processes and techniques and the materials used, that will give you a should cost at a component level. That’s something that we are using now, and I think that will be gaining traction and will become more effective in the years to come.

I think the other angle, when we take this up a level into operations, is more reliance on simulating different operations, and how to manufacture products.

There might be a trade-off between full automation and semi automation. Now through some of these simulation software’s, you can simulate what that will look like in terms of a runtime throughput, the cycle time, the staffing levels required. Once you simulate the best fit to hit the volume requirements that you might have, you can then really start quickly understanding the effects on cost moving forward.

So, the simulation tools and techniques and software’s, that are starting to become more prevalent in the market space will, again, increase in accuracy and will really start to add value in helping us understand and identify where a lot of these opportunities reside.