(Boothroyd Dewhurst: Wakefield, RI) -- Savvy manufacturers are able to root out troublesome costs and problems from their products earlier and earlier in a life cycle that starts even before a computer model is created—and ends with finished automobiles, appliances, and other goods. What’s more, 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, Rhode Island, 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 data for companies locating or sourcing overseas in search of the lowest labor cost,” says Harry Moser, founder of the Reshoring Initiative and retired president of GF AgieCharmilles.
“When total cost of ownership is calculated, most companies headed off shore find that they have saved maybe 10 percent, rather than the 30 to 40 percent they based their decisions on,” says Moser. “When total cost of ownership 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 during 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 United States and low labor cost countries.
Dave Meeker, product consultant and lecturer at the Massachusetts Institute of Technology, 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,” Meeker says. “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, 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,” says 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.”
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.
“The best-performing and highest-quality products are always less labor-intensive to assemble,” notes Gilligan, regarding the reshoring of manufacturing back to the United States. “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, visit www.reshorenow.org or call (847) 726-2975. For a download of 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, or e-mail to email@example.com.