Maximizing profits through ‘Synchronized Simultaneous Engineering’ |
Domestic suppliers need to prepare for a new, aggressive round of belt-tightening. In doing so, they should explore new ways to manage internal and external efforts aimed at reducing cost through product development.
In the early 1990's the domestic automakers have had a sizable advantage over Japanese competitors as a result of a strong yen and weak dollar. The Japanese, however, did not stand idle. Instead, they implemented aggressive cost-cutting programs that would allow them to earn a profit at 80 yen to the dollar. This effort, along with a stronger dollar, has put the Japanese in a position where they can recapture the leadership position in new vehicle pricing.
The attack on new vehicle prices has just begun. Toyota, Honda, Nissan, Lexus, Infinity and Mitsubishi have slashed thousands of dollars off new 1998 MY vehicles. Undoubtedly, this assault on vehicle prices will force the domestic manufacturers into a new and, perhaps, even more serious round of cost cutting aimed at suppliers.
The Japanese automakers’ relentless drive to slash costs is based on their understanding of the consumer, and the impact of design on the profit equation, as depicted below. Simply stated, as price comes under pressure from price conscious consumers, profitability becomes more dependent upon lower cost. And since cost is a derivative of the design (which drives the process and product), profitability becomes dependent on one’s ability to optimize the design for maximum quality and minimum cost through the product development process.
Properly managed, the product development process can become a key competitive weapon in a company’s all-around success. But while most firms employ proper project management principles, they fail to capture all the opportunities available through the product development process.
Over the years, ACG assisted clients in evaluating internal systems for product development, and benchmarked the best practices of others. What we found is that companies, either knowingly or unknowingly, often:
 | place arbitrary limits on the product development process, |
| treat product development as a risk rather than an opportunity; |
| fail to manage the product development process in its entirety |
Since each of these findings is a study in itself, we will focus our attention on just one element of the product development process, a component we will refer to as synchronized simultaneous engineering (SSE).
Simultaneous engineering refers to the synchronous process of product and process development aimed at optimizing the design for cost and quality during the development stage before the start of production. SSE refers to the process of managing dependent simultaneous engineering programs at multiple levels of the supplier base; namely, at the integrator, system and subsystem level. The major benefit of SSE, in addition to cost and quality, is in development cycle time.
After analyzing a number of product development programs of both domestic and Japanese manufacturers, ACG concluded that the most successful development efforts were the result of a well managed system that clearly communicates program goals and individual responsibilities, and emphasizes the mutual dependency of all team members on the overall success of the project.
While many companies may claim they have this system in place, the uniqueness of the most successful programs lie in the level of communication. In a typical product development program, the system provides for communication flow down only to the direct supplier level. More often than not, sub-suppliers are left in the dark. This void can lead to the loss of control and the potential for project delays, cost over-runs, and/or quality glitches. Thus, a system for effectively managing interrelated programs will provide a strategic advantage over competitors.
ACG has developed the framework for a system for effectively managing independent, yet interrelated simultaneous engineering programs across multiple organizations. A synchronized simultaneous engineering system, which is one component of the ‘Integrated Supply Based Management’ concept developed by ACG, provides the means for meeting cost, quality, and timing targets.
Should your firm need assistance in improving its product development process, we would be happy to evaluate your current needs and discuss how we can help you gain control of both internal and external programs. Please call Dennis Virag at (734) 973-1110 or email him at acg@autoconsulting.com to discuss your needs.
