Unlocking Product Value

Outsourcing can cut costs and access manufacturing expertise not always resident at a medical device manufacturer. However, outsourcing also can create information silos that prevent a free exchange of information and lessons learned between a device manufacturer’s engineering team and the contractor’s engineering teams. One way to reap outsourcing’s benefits without the silo effect is to create a cross-functional team that periodically reviews the product for improvement opportunities.
 
Value Analysis Value Engineering (VAVE) is a formalized problem solving process that provides a methodology for contractor-customer team collaboration in identifying product improvement opportunities, validating the most viable options and developing a mutually agreed upon plan for implementation.

VAVE Strategies

VAVE is effective as both a strategic tool in product development process and a cost reduction tool at set phases in a product’s life cycle. Common strategies for deploying VAVE include:

• New Product Optimization: VAVE incorporated into the product development process provides a cost effective methodology for sanity checking the product development team’s assumptions related to manufacturability/testability, component selection and approved vendors. At this stage of the process, contractor change recommendations are relatively easy to implement.
• Obsolescence/Supply Chain Interruption Risk Mitigation: VAVE provides a proactive approach to designing out obsolescence and availability issues before they occur. In addition to performing lifecycle analysis on the product’s bills of materials, the contractor’s team can evaluate component selection in terms of optimum packaging, prior experiences with key suppliers and supplier pipeline risk.
• Strategic Cost Reduction: VAVE reviews may be scheduled for key points in the product’s lifecycle, providing a strategy for cost reduction ladders that create a stream of margin improvements over time similar to staggered returns in a bond ladder strategy.
• Tactical Support Need: VAVE also is a good tool for addressing tactical issues such as unanticipated obsolescence issues or the need to find ways to cost reduce the product without triggering a full re-qualification process.

How It Works

The VAVE methodology is designed to review all aspects of the product and the product realization process.

In our process, areas that are evaluated include:
• Supplier selection and pricing;
• Pipeline risk and lifecycle analysis;
• Manufacturing performance;
• Scrap and returned material authorizations;
• Test enhancement;
• Specification review and component selection; and
• Opportunities for quality improvement.
 
The contractor drives the analysis process. Once the project is identified, teams are formed in both organizations and a roster is published.
 
The initial analysis focuses on the highest value actions and includes:
• Product teardown;
• Bill-of-materials (BOM) life cycle analysis on end-of-life components and not recommended for new design components;
• Supply pipeline risk review;
• Review of alternate component options;
• Development of an attack plan for BOM cost reductions;
• Manufacturing review of returned material authorizations, scrap and repair;
• Test review; and
• Packaging analysis.
 
The next step is risk analysis. This step identifies potential risk issues such as sole sourced components, parts with part change notices, obsolete components and long lead times.
 
Once risks are identified, the cost and quality side of the value analysis begins. Component cost strategies are developed and alternates identified. Manufacturing processes and testing are reviewed to determine if process enhancements can be made. Supplier workshops and/or more design for manufacturing reviews are a critical part of this analysis. Once the potential options are defined, the ideas are costed out.
 
The recommendations are presented to the customer at a feasibility workshop. Form, fit and function analyses are also shared. The customer then provides a feasibility assessment of the ideas presented and an evaluation plan is jointly developed. A communications structure is set up to track implementation.
 
During the implementation phase, a tracking call is held every other week. Status of open actions is reviewed. The contractor collects evaluation samples, implements any agreed upon manufacturing changes and collects specifications for customer engineering review. The customer conducts the feasibility analysis and approves engineering change notice (ECN) accepted evaluations.
 
A tracking spreadsheet known as an Idea Report is used to track the recommendations, approved plan and value enhancement benefits.

Case Study Examples

Unlocking value in products doesn’t necessarily require significant redesign. In the following examples cost reduction was achieved by identifying relatively minor changes.

Example 1: Savings of $16.83 per unit
 
In this example, cost reduction was achieved by:
• Replacing test clips with a minor board redesign;
• Switching a heavier gauge metal in the lid with a lighter gauge, ribbed metal capable of meeting structural requirements;
• Reducing the number of screws securing the panel lid to the enclosure from 15 to eight;
• Replacing three welded threaded inserts with extruded holes and thread-forming screws;
• Re-routing cables to shortest connection distance, thereby shortening cabling length required by 6 inches each;
• Reduce the number standoffs holding the printed board assembly by six; and
• Replacing cable ties with stamped extruded tie mounts in bottom and sides of enclosure.
 
Example 2: Savings of $10.63 per unit
 
Cost reduction recommendations included:
• Remove test clips and use pad or plated through-hole;
• Reverse the side of a hex nut to allow more space for use of a hex socket;
• Eliminate two washers; and
• Replace both the hex space spacer and screws with a circuit board standoff.


 
Both examples eliminated material and unnecessary manual labor, which translates to cost reduction and the elimination of opportunities for quality defects. Example 1 also modified a fabricated metal part that may have been over-specified in the original design. In addition to reducing that part’s raw material and shipping costs, it also reduced the overall weight of the final product, which can translate to reduction in product shipping costs. In short, VAVE can trigger cascading cost improvements by eliminating hidden inefficiencies. In some cases, these opportunities were missed in the initial product design. However, in other cases, advances in manufacturing technology have created more cost efficient processing options.
 
In the contract manufacturing realm, suppliers often talk about becoming extensions of their customers’ manufacturing operations. When VAVE brings a customer’s and contractor’s team together to focus on product improvement, that catchphrase becomes reality.
 
About the author:
Steve McEuen is director, commodity management at EPIC Technologies. He can be reached at [email protected].