Cost & Value Engineering: Enhancing Product Value Beyond Cost Reduction
Fundamentally, Cost & Value Engineering aims to seamlessly blend cost reduction with value augmentation. It goes beyond mere expense-cutting, focusing on areas ripe for improvement to bolster the overall value proposition. This methodology goes beyond the traditional mindset of "cheaper is better" and acknowledges that sometimes spending a bit more upfront can lead to significant long-term gains.
Traditional procurement approaches mainly focus on suppliers and, as procurement becomes more mature, the focus widens to consider contracts, commodities, and categories of spend. However, many procurement organizations fail to take a product perspective. However, moving away from purely commercial levers requires cross-functional collaboration and the capability to combine design, engineering, process, and commercial thinking.
Taking a product perspective
Our cutting-edge Cost & Value Engineering methodology gets to the core of product costs; analysing components and materials in order to reduce cost whilst maintaining quality, and identifying ways to enhance value while reducing cost.
Product tear-down, competitor benchmarking, raw material cost analysis and physical reverse engineering techniques help scrutinize each individual component from a functional, commercial, and technical perspective. To make this work, both cross-functional and collaborative approaches can be used.
Applicable for both new product design as well as for existing product lines, product benchmarking enables us to work out both the specific technical & commercial differences against competitor products. For this purpose, the expertise, and the different perspectives of a cross-functional team from sales, procurement, development must be combined. Product benchmarking includes a tear down of own and competitor products, a functional benchmark as well as a cost calculation. The results provide a range of optimization initiatives which can be used to gain a competitive advantage.
To achieve significant P&L effects of up to 25%, design-to-cost (D2C) workshops on product or component level are a proven approach in which H&Z has long track record. Projects range from automotive & train components to pumps & transformers to consumer electronic products.The critical success factor is supplier collaborative cost reduction; the co-creation of engineering, procurement and supplier, to identify and discuss optimization ideas in the design and manufacturing processes. Joint workshops in combination with target cost analysis, drives measures that achieve significant and step-change improvement in product costs, for both supplier and buyer.