Cost Management

For an enterprise to thrive costs must be under control. There are many approaches of varying complexity available to ensure the organization’s costs are optimized. The variety of techniques allows any organization, independent of levels of complexity and sophistication to critique the cost structure and explore alternatives throughout the product lifecycle.

Brainstorming

Brainstorming can be used for problem-solving as well as uncovering alternative approaches that may improve the cost structure for the product or process. Brainstorming is conducted multidiscipline to gather the most perspectives possible from which selection of the best possible solution will be made. We will employ many team idea generating and collecting methods as well as the use of tools such as mind mapping to build associations from which we can generate the best solution. Brainstorming does not apply solely to cost, but can also be applied to design solutions as well. We have used this technique many times to improve cost and generate intellectual property (patents).

Function Allocation Systems Technique

FAST is an acronym for functional analysis system technique. FAST allows us to reduce ambiguity in the definition of a functional product or a functional process. Value of a product is interpreted differently by different customers. Characteristics that are common to value are high level performance, capability, emotional appeal, and style relative to its cost. Value is generally expressed in terms of maximizing the function.

Value = (Performance + Capability)/Cost
Value = Function/Cost

Lean

Lean is a set of techniques that are typically employed to improve the costs in manufacturing by reducing waste, but not exclusively. In fact, this technique can be applied to process management in general, such as product development, and not just manufacturing. Cost improvement comes from managing and controlling aspects of manufacturing that have increase the cost. This includes transportation, inventory, motion, wait, over processing, over production, and defects.

Make or Buy Analysis

Make or buy analysis considers the scope and objective of the work compared to the company strategies and tactics for growth. Make refers to the company decision to internally handle the design and or fabrication of the component or subassembly. Buy refers to outsourcing the component or subassembly. There can be many compelling reasons to select one or the other of these alternatives rather than leave to random chance or little forethought.

Teardown

Teardowns are used to learn the cost implications of the design, often another manufacturer of the product. Tearing the product down is one method to identify and understand the cost drivers for the product. This includes the manufacturing, material composition and assembly of the product. The teardown will be multidiscipline approach to obtain a multitude of perspectives that will help ascertain the constituents of the product cost. This can be material, design or methods of production.

Brainstorming

Brainstorming and Cost Improvement The brainstorming technique is attributed to Alex Faickney Osborne as explained in his 1953 book, Applied Imagination. The technique arose from frustration with the inability of employees to develop creative solutions for problems. Personal experience suggests this is a valuable tool when deployed appropriately and the guidelines are followed. If we […]

Reducing Cost – Homegrown Way.

To really find the areas for cost improvement we must let go of our mental impediments to uncovering these opportunities. It is very probable that there are plenty of cost improvement possibilities. However, in our daily work execution we may not find the time to free our minds to consider these possibilities. A brainstorming exercise can go far to fuel the imagination, to open a “space” to think laterally at what may be possible. We have successfully employed this technique to:

Risk versus Reward (The Bet)

A company is deciding to undertake product development project, there is a consideration that amounts to a type of bet.

WBS and Project Budgets

Recently, I was in a conversation with a project manager whose organization had just made a radical alteration to their manner of handling work breakdown structure. There is a connection between the work breakdown structure and the financial tracking for the project. Ideally, there is an immediate connection between the WBS and the expenditures for […]

Measurement effects and analysis on personnel and organizations

by: Shawn P. Quigley Whereas we have discussed some of the possible flaws in measurements we can all still agree that they are needed to provide both improvement in processes and the organization. However, other aspects of obtaining data for the production of quantifiable information: trend analysis and process evaluation, is the human factor both […]

Product Life-Cycle – The Development Phase

In the development phase of the product development life cycle, we are generating ideas for the product. We see opportunities in the market place and wish to explore if we can capitalize (not a vulgar word) upon these opportunities.  Perhaps a new technology has become available to us.  Our organization will want to investigate the […]

Onboarding can be Costly

Onboarding Defined First, we should probably explain or define onboarding.  Onboarding is the collection of activities associated with our present staff socializing and training our newly acquired talent.  The older employees take time out of their day to demonstrate behaviors and pass on specific knowledge and skills. Onboarding New Hires Recently a person that I […]

Introduction to FAST part 2

Below is an excerpt from our book Pries, K., & Quigley, J. (2013). Classical Techniques. In Reducing process costs with lean, six sigma, and value engineering techniques (pp. 135-138). Boca Raton, FL: CRC Press. This is the second part, part one is located here. Miles also identified the concept of basic and secondary functions. Basic functions are the […]

Introduction to FAST part 1

Below is an excerpt from our book Pries, K., & Quigley, J. (2013). Classical Techniques. In Reducing process costs with lean, six sigma, and value engineering techniques (pp. 133-135). Boca Raton, FL: CRC Press.  FAST Introduction FAST is an acronym for functional analysis system technique. FAST allows us to reduce ambiguity in the definition of a functional product […]

Value Transformation Training Areas

  Value Transformation training areas from cradle to grave, a product and project management. We offer training and consulting on the many challenges that come with developing products and complex systems.  

Building a Cause and Effect Diagram

Pugh Matrix

How to Brainstorm

Using Pareto Charts

Contact Value Transformation about Cost Management