- Lowering the cost position with innovative process, product & solution improvements surpasses other conservative methods of cost reductions.
- Extending Design to Cost innovation to the vendors lead to overall benefit of the professional society.
- Standardization lead to productivity improvement and knowledge retention.
- Efforts conserved through Material cost Productivity can be invested in creating new market with MCP as catalyst.
- Design to Cost culture across the organization would enable extension to supplier’s innovation leading to overall performance improvement and set a bench mark.
- Material cost productivity extended to installation and commissioning benefit the organization a smooth handover and cost & time improvement to demobilize the resources earlier than planned.
- With market shrinking due to low Oil, minerals prices, and consequent to this companies are compelled to lower the cost position.
- Stake holders demand still higher returns which means either to reduce the Overheads by reducing the Head Counts or innovate to bring down cost of project and solutions or both.
- In the last three years this is termed as Productivity Improvement through Cost Out.
- Thus when the Cost Position gets lowered benefits companies to maintain the profit in spite of reduction in volume and to an extent satisfy share holders.
- To keep fixed cost lower HC reduction is the only measure companies adopt.
- In majority cases have to sell away valuable fixed assets to maintain operation.
- improve through innovative ideas in engineering development – minimize cost position.
- A systematic program with full dedication at levels to bring these ideas step by step in engineering evolution supported by procurement, quality and validation can result in
- This is termed as Design to Cost measures which can benefit every project to lower the cost position in terms of savings in material, services and utility.
- The learning of such process can become reference and could be standardized.
- Through effective knowledge management these measures can be retrieved to fix reference cost for similar solutions.
- This will offer flexibility to top management to strategize market price, secure profits , increase market share, improve cash flow and expand to new areas.
- Is it possible/reasonable to more differentiate the requirements/specifications, e.g. design standards of client for Value /Benefits – Weight, Heat Dissipation
- Can packages /deliverables taken from other projects? Can design be according to industry standards or “competitor standards“ or previous projects?
- Does a marginal cost add in material or in fabrication can bring reduction in other subsequent delivery chain?
- Can we bundle similar requirements of other projects or design standards to simplify the building block design??
- Is there an alternative technical concept which leads to lower costs at same specification?
- How does this concept look like at planned successor?
- Can the Overlap of design features between building blocks be eliminated?
- Engineering, Technical procurement, Logistics support pre-commissioning resources sourced from Low cost countries?
- Can we get exception from client for complicated procedures with simplified & proven Where are critical bottlenecks in the manufacture process?
- Engineering tools to produce various shop/assembly deliverables to minimize errors & rework
- Simplified assembly & testing process to widen the vendors choice and produce more volume
- Tool to produce logistics documents for technical verifications & authentications.
- Lump up the process for similar packages & solutions in Project Management , Procurement & Contract administrations functions.
- Engage single transport vendor to collect materials from different vendors on project basis to eliminate vendor related Over heads in their logistics& volume discount, processing time.
- Combine commissioning & maintained spares of different projects & solutions business.
- Critical Lump Sum items like cables, SS pipes special arrangements with VENDORS for Forward Purchase with Lock in price & Optimized engineered quantity.
- Design of sub packages &individual product so combine parts to increase purchase quantity.
- Can reliable internal/external vendor take over production of deliverables and manufacture of less Value add packs.
- From sales pipeline asses Critical Long lead items , prepare Technical MR to block Quantity with locked in delivery & price.
- Extend the MCP concept to Vendors on their process and share the benefit through incentivizing.
- Encourage Supplier innovation to bring reduction in cost, time & increase value add.
- Vendor T&C which is out of technical demand from engineering may boost the vendor cost? Revisit the areas to redesign the building blocks to eliminate artificial cost cushions from vendors.
GG Engineering & Consultancy package modules to suit the business & structure.
Material Cost Productivity is the only way to improve contribution to net income.