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CONTENTS
Cross-functional product cost reduction in commercial vehicles industry
Driving significant product cost improvement – via engineering and value chain complexity reduction for a commercial vehicles client.
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THE BRIEF

A global manufacturer of commercial vehicles experienced unsatisfactory margins and a lack of competitiveness in key market segments.

High Degree of Customisation
The company’s assessment of the situation was that this was primarily caused by too high product cost. A key underlying reason was a high degree of customisation of products, driving significant complexity in all parts of the supply chain.

Market Demand
Furthermore, the company’s approach to design modularisation was limited and existing modules/variants did not fully correspond to actual market demand. Combined, these factors contributed to significant complexity and excess cost in all parts of the value chain.

Unsatisfactory margins, caused by costly product designs and complexities in the industrial system

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THE SOLUTION
A cross-functional program organisation with top management sponsorship was established, including active involvement from R&D, purchasing, manufacturing as well as marketing and sales.

Analysis
An in-depth internal cost and design analysis was performed, on product, system and component level. This generated immediate improvement ideas, but also served as a “baseline” for subsequent value engineering opportunities.

External Benchmarking
An external benchmarking analysis was performed, including all major competitors’ products. Products were systematically disassembled in a dedicated “tear-down” factory, where cross-functional teams analysed and compared design solutions from a cost and value perspective.

High Degree of Acceptance
While competitor benchmarking exercises were not entirely new to the company, the level of detail and structure of the analyses provided significantly more improvement ideas, and equally important – a very high degree of acceptance and ownership to realise these ideas and implement these solutions.

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THE RESULT

All of the best ideas were recorded, planned and prioritised for implementation. In total, the program delivered a 200% cost reduction compared to the original target, and more than half came from solutions that needed less than 6 months to reach full impact.

Additionally, program learnings were also actively used to define new technical design principles – for more efficient design work on new products.

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