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ASCM Insights

Collaborate Early to Reach Cost Targets at Product Launch

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Professionals tasked with new-product introduction at tier one automotive suppliers face multifarious challenges: They must accelerate the advancement of disruptive technologies that continue to reshape mobility. As modules are comprised of constantly changing bills of material (BOMs), with evermore sensors and options, these professionals strive to keep costs low to ensure sustainable program profits. Meanwhile, they are developing and launching current systems to meet original equipment manufacturer (OEM) start-of-production (SOP) dates.

With disruptions happening all the time, supply chain professionals are constantly challenged to work in newer, more agile ways. The ability to commercialize future disruptive technologies largely hinges on the ability to collaborate more closely both inside and outside the four walls of the business — especially for tier one automotive suppliers. However, if stakeholders join forces to more efficiently act on early BOM data, the productivity gains will help their supply chain organizations thrive in the evolving mobility landscape. 

To uncover what specific actions leading automotive tier one suppliers take in order to better meet cost targets, supply chain services and software technology company IndustryStar Solutions and the Haworth College of Business at Western Michigan University in Kalamazoo recently conducted a comprehensive survey. Professionals at 16 tier one suppliers were interviewed about their new-product introduction processes. These individuals represented companies including AAM, BorgWarner, Denso Corporation, Inteva Products, Lacks Enterprises, Lear Corporation, Magna International, Singh Vision Systems, Toyota Boshoku Corporation and Veoneer-Nissin Brake Systems.

In addition to the interviews, IndustryStar Solutions and Western Michigan University conducted extensive experiments to reveal what actions brought about the greatest results. They realized two key discoveries:

First, companies that collaborate earlier in the new-product development process tend to be more satisfied with their ultimate program cost results, generate larger profits and enjoy a clear competitive advantage by being first to market with new innovations. The value potential is clear, with 75% of respondents saying this kind of collaboration helped optimize new-product introduction and reduce ongoing production cost. In addition, 88% said collaboration resulted in a competitive advantage, 81% plan to increase collaborative efforts in the future, and 94% want to start even earlier in the production process.

Second, collaborative new-product development efforts also create the potential for future value. Unfortunately, the suppliers surveyed said that unexpected headwinds often make it difficult to realize that value. Only 31% of suppliers are currently satisfied with their results, and 69% say they lack a clear process to integrate with tier two suppliers.

Following are five steps that the IndustryStar Solutions and Western Michigan University research indicates can help automotive tier one suppliers better meet cost targets. Although the research was specific to the automotive industry, these lessons can be applied at all kinds of businesses and supply chain organizations.

  1. Consolidate multiple BOMs to eliminate repetitive work. The first step is transitioning from separate design, engineering, procurement, manufacturing, supplier quality and logistics BOMs into a single, common, early-module BOM. This is no small task, but it can be accomplished by crafting a plan to diligently consolidate versions into one master template. Typically, various automotive tier one departments each have similar early BOM templates that contain repetitive commercial and technical data, such as part numbers, descriptions and quantities. These data inputs can be quickly merged to bolster process consistency and reduce human error.

After the consolidation, each function’s specific data inputs should be added in and formatted into columns. It is also helpful to format process data sequentially, such as by organizing data inputs by the order of completion date within the program life cycle. For instance, the engineering drawing release date should come before the purchasing expected quote response date. Lastly, including a column that lists the leads of each BOM data input section can smooth the transition from functional BOMs while promoting accountability and reducing repetitive data tracking. 

  1. Segment parts into categories. There are several common best practices for organizing modules into categories in order to enhance communication, advance execution and gain earlier cost insights. Categorizing each part allows cross-functional team members and company leadership to efficiently filter data and glean the desired information. As an example, categorizing parts enables people to quickly filter data and find out that purchased wiring harness assemblies make up 13% of an overall module’s costs — 4% higher than target costs. This information then could be acted on in the design phase, potentially spurring the selection of alternative connectors or the quotation of alternative, lower-cost suppliers.

As a point of reference, the most common category approaches for organizing module BOMs are

  • level
  • commodity (typically general baskets of like components)
  • manufacturing process
  • raw material
  • part types (purchased/common, modified or custom)
  • ABC criticality
  • lead time.

In order to support the goal of maintaining one common BOM across all business functions, each of these categories should be tracked in the standard BOM.

  1. Deploy an automated plan for every part. Creating one company master BOM template in a spreadsheet can work, but increasingly tight OEM timelines and additional complexity are starting to form dents in homegrown tools. Left unchecked — especially with multisite, global teams — the system can quickly revert to multiple offline BOMs.

Forward-thinking suppliers are accelerating new-product development by deploying automated plan-for-every-part (PFEP) cloud tools in order to bridge the technology gap between product life cycle management (PLM) and enterprise resources planning (ERP) systems. Automated PFEP software enables multiple cross-functional team members to view, edit and track changes in real time. Further, application programing interfaces (APIs) can be easily connected to PLM software so that the latest part engineering change notices are pushed automatically.

Once a program transitions to production, APIs also can push final module data — for example, part quantities, weights and costs — to the ERP system in order to dramatically reduce the time it takes to process and enter data. Results include meaningful productivity gains, product- development cost reductions, time-savings and reduced risk.

  1. Use PLM software to better manage changes. Leveraging APIs to connect with automated PFEP and PLM tools saves team members a lot of time because the latest part data is automatically pulled from engineering. Furthermore, there are fewer engineering inquiries about early part supplier feedback. This alone can be worth deploying automated PFEP software, but the supply chain organization will also benefit from earlier access to part design, manufacturing processes and assembly data. This can help shape supplier development and strategic sourcing paths. Then, it’s possible to take the associated time-savings and spend them advancing critical new commodity relationships and high-impact negotiations.

Purchasing teams also spend many hours tracking and reporting on part-revision costs and timing impacts. To address this problem, changes to part cost and lead time also can be automated using PFEP software. When cross-functional teams can review and analyze early commercial changes in real time, the result is an intelligence treasure trove. When combined with other newfound opportunities, it also helps business leaders support their teams by identifying and remediating headwinds faster — and without the feeling of being micromanaged.

  1. Digitize reporting dashboards to better meet cost targets. Program cost targets that are set up front, tracked throughout the process and communicated often have a better chance of being met at launch. Entrusting extended teams with advanced module data leads to inspired, creative, cost-reduction breakthroughs. For instance, mapping early module BOMs into user-friendly dashboards with the latest program information throughout development results in swifter decision-making based on the very latest information.

Similarly, real-time access to digital dashboards with cost information about programs in development is a key enabler because it empowers team members to act decisively. This is a key point: Access to information is not enough; an aligned, cross-functional team is paramount to success. Making these significant company culture adjustments can take time, but it is well worth the effort to achieve such meaningful efficiencies and advances.

ACCELERATING FUTURE TECHNOLOGY COMMERCIALIZATION

The mobility landscape is evolving rapidly, with a wide range of new technologies continuously reframing future vehicle systems. As the sector continues to reinvent itself through new technologies and services, supply chain will play a greater role in new-product introduction. To maximize the opportunities, empower teams with better tools that facilitate superior collaboration.

About the Author

William Crane, CSCP CEO, IndustryStar Solutions, LLC

William Crane, CSCP, is CEO of IndustryStar Solutions LLC, an on-demand supply chain services and software technology company that partners with leaders to reduce the cost, time and risk of bringing new product ideas to production and beyond. He may be contacted at william.crane@industrystar.com.

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