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Cost engineering methods and processes

Cost engineering (or in German Kostenplanung) focuses on product design, production technology and logistics. Cost planning is aimed at improving product design, production process, and material flow, resulting in optimal product costs, under the assumptions of consistent strength, durability and quality of the product. Thus improved economy is achieved.

In the early nineties of last century, Daimler AG (Mercedes-Benz) in Germany began to build a new department of  ​​cost planning, and connected a whole set of systematic cost planning methods, processes and database covering the entire development and production of products from product development, serial production and up to serial changes have been successfully used. After the financial crisis of 2008, cost planning at Mercedes-Benz became an integral part of the module strategy of all vehicle series over the entire lifetime. Mercedes-Benz is therefore one of the leading companies in cost engineering.

1. Value analysis of parts
Manufacturing
Function
Surface treatment
Material
Standards & Tolerance

With the help of standardized questionnaire, parts & subassembly will be analysed systematically according to function versus value for creating technical cost saving ideas

2. Reference cost calculation model

With the reference cost calculation model, the production line, logistics, equipment maintenance & management process are simulated, the reference cost and the cost details of the product are accurately calculated at the production efficiency level of Benchmark.

3. Design to coste.g. morphological box

Example: headlamp

high cost

low cost

submodule

Full LED

high/low beam

halogenlamp 120 RMB

3X LED

45 RMB

turn indicator

 Single power LED

bulb

Cost driver

7X LED

70 RMB

2XSingle power LED

DRL

12X LED 

two-piece

front cover

one-piece 25 RMB

back cover

one-piece+galvanic Al-coated 35 RMB

total   295 RMB

target cost   300 RMB

Based on the configuration of the sub-modules according to the cost driver and the cost level, we get a optimized technical solution matched the function and the target cost
Transmission control mechanism bracket

Optimization Approach


Under the conditions of remained part performance and the car body stiffness, by means of the material and manufacturing technology changes, the single part cost can be reduced by 45 RMB, cost reduction in total 10.12 Mio. RMB (NPV), weight reduction 647g.



implemented at the production line

Starter Wiring Harness Subassembly

Optimization Approach


If the performance of the complete vehicle has been fulfilled, the starter wiring subassembly material can be changed from copper to aluminum, the terminal will be ultra-sonic welded, piece cost reduced by 2.1 RMB, cost reduction in total 0.63 Mio. RMB, in additional weight reduction by 140.85g.

implemented at the production line

Bumper Underbody

Optimization Approach


By the optimization of the color paint layer, the three paint layer (base, color and clear paint layer) can be substituded by only two paint layer (base and color paint layer), the visual and durability qua-lity of the product is still remained, cost reduction per vehicle by 30 RMB, cost reduction in total 14.50 Mio. RMB.

implemented at the production line
Manufacturing Industry

Current situation and future analysis of automotive companies


- -  Raw materials, energy, labor costs continue to increase
-  Market competition led to declining sales prices
New energy vehicle market development bottlenecks: high-cost batteries and other new systems, lack of infrastructure

-  Autonomous driving, connected, digitalization requires a lot of R&D resources, product cost pressures will be more higher


Way out: at the conditions of remained performance and quality, all related  product costs (design, manufacturing, logistics) have to be reduced.

Automobile Industry

Current situation and future analysis of  household  Appliances supplier industry


in the household  appliances industrythere are hard market competition, short product life cycle and customer's personalized experience needsmany companies decided the cost efficiecy as leading corporate strategy.


Faced increasing raw materials, labor and energy costs,and decreasing sales prices due to market competition, under the conditions of remained quality and performanceto optimize product design and production process cost, becomes one of the core work of household appliances enterprises.


The digitalization, internet connection,  artificial intelligence, ergo-nomics of household  appliances, need significant R&D resources, and increase further the pressure on product costs.

 Household  Appliances Industry
Current situation and future analysis of parts supplier industry


-  Customer (OEM) decreases annual target costs

-  More product innovation, higher quality and reliability requirements

   lead to increased research and development, verification resource

-  Raw materials, energy, labor costs continue to increase

-  One of the key factors in winning the bid is a competitive offer


Way out: companies in order to maintain a reasonable profit, sustainable development, in the conditions of remained performance and quality have to reduce the materials, manufacturing and logistic costs of the products.
Parts Supplier  Industry