The good news is that increasingly savvy manufacturers are able to root out troublesome costs and problems from their products earlier and earlier in a lifecycle that starts even before a computer model is created—and ends with finished automobiles, appliances and other goods.
The better news is that they can now use the same tools and approaches to bring jobs back from overseas. According to two experts who spoke at the recent 26th annual International Forum on Design for Manufacture and Assembly (DFMA®), held in Warwick, R.I., the job solution lies in recognizing the hidden costs of offshoring and embracing “upfront engineering” as a business model for innovation and profit creation.
“Traditional corporate and enterprise accounting systems do not generate total cost of ownership (TCO) data for companies locating or sourcing overseas in search of the lowest labor cost,” said Harry Moser, founder of the Reshoring Initiative and retired president of GF AgieCharmilles.
“When total cost of ownership is calculated,” said Moser, “most companies headed offshore find that they have saved maybe 10 percent, rather than the 30-40 percent they based their decisions upon. When TCO analysis is combined with DFMA product redesign and Lean Manufacturing programs, we’re learning that the gap can close or disappear today—and will definitely close in the next few years.”
The Reshoring Initiative offers free software and an online library of 98 articles to help companies construct a clearer view of the competitive landscape between the U.S. and LLCC’s (Low Labor Cost Countries).
Dave Meeker, product consultant and lecturer at MIT, updated a co-authored study from 2004 on the hidden costs of offshoring and shared his views from the same podium as Moser.
“Seven years later, the problem of not accounting for total cost continues for most companies,” said Meeker. “Labor is the common metric businesses pick in deciding to take production overseas. Yet, the largest slice of the cost pie is not really the labor content but the material and manufacturing process choices engineers make.”
“Then, as well as now,” he continued, “redesigns using DFMA show that assembly labor can be reduced an average of 45 percent while creating better functional designs. Add a very conservative 24 percent to offshored product costs to cover logistics, supply chain management and other expenses, and the playing field begins to shift. The evidence suggests that we can start to engineer our way out of the offshoring problem by streamlining designs and understanding the real costs.”
DFMA software guides engineers to assess the structural efficiency of their products and then reduce the assembly cost by consolidating individual parts into elegant, multifunctional designs. Product development teams can examine competing materials and processes and quantitatively judge the cost trade-offs of producing new designs or improving existing products.
“Upfront engineering, or early analysis, is a fundamental idea used more and more as a business approach by leading manufacturers,” said John Gilligan, president of Boothroyd Dewhurst, Inc. “Companies at the DFMA Forum found significant savings in product cycle times and total costs by tackling design issues earlier in development,” said Gilligan.
ITT Aerospace Controls, for example, reported 76-percent cost avoidance for a butterfly valve redesign and a threefold increase in factory throughput. International Game Technology (IGT), which produces computerized gaming machines, found 60 percent in cost savings on a new product and realized a tenfold improvement in disassembly times for service operations and system upgrades.
Regarding the reshoring of manufacturing back to the U.S., Gilligan noted: “The best-performing and highest-quality products are always less labor intensive to assemble. When all the costs of doing business are considered, DFMA can help companies stay onshore by helping engineers design products that are cost-effective to build anywhere, without chasing the lowest offshore labor rate.”
For more information about the Reshoring Initiative, go to: www.reshorenow.org, or call (847) 726-2975. For a download of Dave Meeker’s study: “The True Cost of Overseas Manufacture Revisited Seven Years Later,” go to: http://www.dfma.com/truecost/index.html or call (978) 621-9258; email firstname.lastname@example.org.
About Boothroyd Dewhurst, Inc.
Boothroyd Dewhurst, Inc. was the first company to commercialize Design for Manufacture and Assembly (DFMA) methodologies and software tools, which make it possible to evaluate, estimate, and reduce the manufacturing cost of a product in the design phase through product simplification and cost estimation. Hundreds of Fortune 1000 companies, including Dell, John Deere, Boeing and Whirlpool, use DFMA to cut the costs of their manufactured products and achieve design innovation in their markets. The company was founded in 1983 and received the National Medal of Technology Award in 1991. For more information about DFMA software, workshops, consulting services, and international conferences, contact Boothroyd Dewhurst, Inc., 138 Main Street, Wakefield, R.I. 02879, USA. Tel. (401) 783-5840. Fax (401) 783-6872. Web site: www.dfma.com. E-mail: email@example.com.
DFMA is a registered trademark of Boothroyd Dewhurst, Inc.