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Material Cost Productivity

  • 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.

    • GG Engineering & Consultancy package modules to suit the business & structure.

    Material Cost Productivity is the only way to improve contribution to net income.

    Current Business Environment

  • 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.

    • What can we do to survive?

  • 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.

    • Ideas in pre engineering & contract development stage

  • 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?

    • Ideas to improve in business process

  • 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.

    • Ideas to leverage in supply chain managment

  • 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.