Boothroyd Dewhurst, Inc. www.dfma.

com

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 About Boothroyd Dewhurst, Inc. What is DFMA. What is outsourcing and why do it. The hidden costs of overseas manufacture. Case Studies: What we thought in 2004 What is happening today Brief Software Overview.
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 Methodology & databases developed in late 70s with NSF funding BDI formed in 1980, first software released in 1983 Founders of DFMA copyright held by BDI Market leader for nearly three decades, helped by industrial research & user-feedback Software in use by more than 850 industrial corporations 1991 National Medal of Technology
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 Design for Manufacture and Assembly (DFMA) is a tool for early product design evaluation that simplifies the design concept through part reduction strategies and predicts assembly and manufacturing costs. DFMA software helps remove product costs without compromising function, while improving quality, reliability, and delivery times. DFMA allows engineering teams to quantify their ideas and create more-innovative products.
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Labor, 4% Overhead, 24%

Piece Part Costs, 72%

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Copyright Boothroyd Dewhurst, Inc. 2008

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Supplier Costing As a should-cost tool to provide cost estimates, help validate supplier quotes, and to negotiate suppliers bids and contracts

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end plate sheet steel

2 small screws

bushing - plastic

motor

2 standoffs steel - machined sensor

2 motor screws Set screw 2 bushings powder metal - brass base - machined aluminum 4 small screws

cover - sheet steel - welded

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Category
Purchaed Items

Part Name
Motor Sensor Plastic Bushing Brass Bushings

Qty Part Num Item Cost ($)

1 1 1 2 1 2 1 1 4 2 2 1 616-BDI-03 109-BDI-03 279-BDI-03 643-BDI-03 074-BDI-03 012-BDI-03 257-BDI-03 753-BDI-03 975-BDI-03 123-BDI-03 245-BDI-03 097-BDI-03 $ $ $ $ $ $ $ $ $ $ $ $ 12.55 1.58 0.22 1.53 16.38 4.87 1.44 2.08 0.03 0.03 0.05 0.03

Supplier
ACME Motor Sensor-Rama Bushings R Us Bushings R Us USA Machine USA Machine Joe's Sheetmetal Joe's Sheetmetal Fasteners, Fasteners, Fasteners, Fasteners, Inc. Inc. Inc. Inc.

Manufactured Items Motor Base Standoffs End Plate Cover Hardware Cover Screws End Plate Screws Motor Screws Set Screw

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Part Name
Plastic Bushing Brass Bushings Motor Base Standoffs End Plate Cover

Qty Part Num Item Cost ($) Should Cost ($)

1 2 1 2 1 1 279-BDI-03 643-BDI-03 074-BDI-03 012-BDI-03 257-BDI-03 753-BDI-03 Total $ $ $ $ $ $ $ 0.22 1.53 16.38 4.87 1.44 2.08 $ $ $ $ $ $ 0.20 1.35 12.53 2.51 1.38 1.94 19.91

26.52 $

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Product Costing As a benchmarking tool to study your products and/or competitors products by quantifying manufacturing process, material selection, and assembly alternatives

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Consider the following part

What is the optimal process? Would a change in process result in a cost savings? Can we give information to purchasing that will influence the supplier choice? Would overseas manufacture make sense from a cost standpoint?
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DFMA output

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Product Simplification To provide guidance to the design team in simplifying the product structure, reducing manufacturing and assembly costs and quantifying improvements

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cover injection molding

motor 2 motor screws sensor small screw

base - nylon

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63 percent reduction in parts 4 suppliers removed from supply chain 63 percent reduction in detail drawings 74 percent reduction in assembly time Equal reduction in labor cost And lets not forget.

46% Reduction in Total Cost of the product

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Main Entry: outsourcing Pronunciation: -Out-sOr-si[ng], -"sorFunction: noun : the practice of subcontracting manufacturing work to the outside and especially foreign or nonunion companies

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One alleged benefit of Out-Sourcing is a lower cost although this com m on w isdom may be part urban legend.
Only a small part of the value added is the actual assembly labor. It takes a lot of folks to create the environment so that somebody on the floor can make something. Most of that cost is overhead. Overhead costs can be classified in two categories:

Fixed volume independent like tooling/equipment depreciation and other period costs Variable - dependent directly on the volume like supervision, consumables, and fringe.

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Product manufacture that is to be outsourced abroad could be kept in the U.S. when three things are done. 1. Quantify the true cost of outsourcing. 2. Quantify the actual cost of your product. 3. Use DFMA to redesign your product to enable it to be competitive in the U.S.

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Current literature covers the problems with outsourcing as a command and control problem.
Higher Costs from reduced visibility and control Increased Liability from distributed (and dedicated) inventories Increased Supply Chain Latency due to information flows that are sequentially cascaded from company to company up and down the supply chain. Higher Financial Risks due to difficulties measuring and monitoring performance outside the four walls.

Loss of Intellectual Property (IP) and competitive edge if your design information leaks to competitors www.dfma.com or customers. Cost Reduction Tools
Boothroyd Dewhurst, Inc.

Our premise doesnt apply to all manufactured products. Products that are 80% labor and 20% material clearly will have a cost advantage by moving to lower labor cost countries.

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Many have heard the Sirens song of lower manufacturing cost only to end up on the rocks of reality.

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Outsourcing in a global economy is a complex and multifaceted issue China has pegged the Yuan at 6.83 to the 1 U.S. dollar since 1994. Federal Reserve Chairman Alan Greenspan commented that if China were to let its currency float, it would weaken the countrys banking system and threaten the world economy. Lack of job creation in the U.S. is in part due to gains in productivity Forrester Research predicts 3.4 million white collar jobs will be shipped offshore by 2015. Many of these 3.4 million jobs are Business Process Outsourcing (BPO)

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Travel
$4000 - $6000 per flight (round trip business class) $172 per diem (average for China from State Department, commercial rate is higher) Loss of two entire days for travel time. Travel inside China on Dragon Air is a must!

Time zone difference

13 Time zones between US and China A day of lag time occurs due to time difference Makes non-written communication very difficult

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 Every year more than a 100 million containers cross the oceans
Each year more than 10,000 containers fall overboard 1990 1991 1992 1994 1994 1997 1997 80,000 Nike Tennis shoes in Mid North Pacific Ocean 414 drums of Arsenic near New York 29,000 bath toys ducks, frogs, turtles, beavers 20,000 Boltio sandals 34,000 hockey gloves 500,000 cans of beer into Pacific 5 million Lego plastic pieces

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Finding a vendor
Usually done through a third party Costs for this service vary widely Make sure the tour matches reality Appropriate selection paramount to success Dont under estimate time and expense of this process

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 Language and History Principal of Guanxi or Relationship

Connections based on mutual trust, trading favors and shared obligations. Extensive networks. Guanxi networks create trust among fellow Chinese and create barriers to outsiders.

Legal Climate
Western businesses approach relationships with standard contract revisions and alterations. Commercial law is ingrained in our thinking. Traditionally in China commercial law barely existed, obligations come from relationships.

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40 HiCube External Dimensions 40 x 8 9 x 6 Internal Dimensions 39 5.375 x 7 8.625 x 8 10 Typically container cannot be packed 100% full. Typical container can be loaded to 85% capacity. 2300 feet cubed. Time on the water is 3 weeks. Time in port outbound and inbound as much as a week at each end. Costs $4500-$5500 depending on departure and arrival destinations Air freight is currently $8.50 per pound (5 to 40 lbs). Shipping by air is VERY expensive!!!

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The U.S. Department of Labor Statistics publishes International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing. The last report is USDL 03-507, September 2003. Data is adjusted and mathematically modeled to be an apples to apples comparison: Country United States Hong Kong Singapore Taiwan
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Hourly wage in (U.S. $) 2002 yr. $21.33 $5.83 $7.27 $5.41

Typical labor rates

Rates vary at less than $1 per hour for unskilled Skilled 0.50 cents to $3.00 variance Many companies included 2-3 meals a day & a bed in dormitory

How long is the work week?

Work week is 12-14 hours per day, 6 days a week. The seventh day off is usually because of power conservation.

Skill level
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Most labor is unskilled staff from rural areas.

 Material cost differences between US and China Some materials are actually more expensive abroad Lower quality materials available in some cases

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www.dfma.com Cost Reduction Tools Boothroyd Dewhurst, Inc.

Numbers set forth in 2004 and reviewed for this presentation to ensure they were still valid
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Product: Milwaukee inch drill, Model 0238-1 Redesign to create Model 0299-20 Then redesign Model 0299-20 using DFMA

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DFMA redesign ideas:

Change the gears from being machined from forged blanks to being made from powder metal (saves $10.07 per unit) Replace the roller ball bearings with powder metal bushings (saves $0.99 per unit) Change the side handle back to the 0238 design, where it is simply threaded into the gear case (saves $1.82 in material and $1.18 in labor) Remove two screws from the gear casing and use two long screws through the back of the handle to hold the gear case to the handle body (saves $0.14 per unit) Mold in the nameplate and laser etch the serial number (saves $0.25 per unit) Mold a feature into the drill body to hold the chuck key and eliminate the separate part currently used to hold the key (saves $0.28 per unit)

Considering all of these savings together, there are potential DFMA savings of $13.55 in material costs and $1.18 in labor.
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Cost summary for original and redesigned drill:

0283-1 drill cost 0299-20 drill cost 0299-20 DFMA Redesign 0299-20 drill cost (China)

$ $ $ $

100.03 92.59 77.86 63.62

Numbers in 2004 dollars. All of the cost numbers provided here have been altered to protect the confidentiality of the information supplied by Milwaukee Electric Tool.

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Cost including outsourcing: Total cost to manufacture in China is $63.62 Add the cost of outsourcing, or 24%, for a total of

$78.89
DFMA redesign cost in the U.S. is $77.86, so outsourcing results in a cost increase of $1.03.
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40 potential leak sites galvanic, crevice corrosion Susceptible to corrosion - 7 different metals Tremendous amount of machining Extensive component assembly, and service issues Labor intensive installation - 9 hoses installed with hose clamps Aluminum anodized and protected by 4 paint coatings with Hazardous Air Pollutants Two Paint layers contain Cr+6 Fuel vapors released to environment upon heat soak Complex end-of-life disassembly and recycling Extensive, Asian supply chain due to number of materials and subcomponents with little integration Commonality with other outboards difficult
Slide courtesy of Dr. Kevin Anderson, Mercury Marine Kevin_Anderson@mercmarine.com

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Functional Integration Corrosion Prevention Environmental Responsibility Design Processes

Lean Design Safety Critical Design Design for Six-Sigma DFM and DFA

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Slide courtesy of Dr. Kevin Anderson, Mercury Marine Kevin_Anderson@mercmarine.com

Eliminated 31 leak paths, galvanic and crevice corrosion. Corrosion resistant- polyamide and stainless Minimal machining- only 1 reamed hole Simple component assembly Integrated quick connect fittings Environmentally Friendly Uncoated, no toxic metal finishing processes required No Cr+6 or toxic materials 75% less evaporative fuel emissions Fewer materials simplifies end-of-life recycling Increased reliability due to corrosion resistance and part reduction Cost-effective, short U.S. supply chain due to simple elegant design and excellent material and process selection Component platform approach 1.0 Kg weight reduction (35%) 13% cost savings

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Slide courtesy of Dr. Kevin Anderson, Mercury Marine Kevin_Anderson@mercmarine.com

 Five year implementation of DFMA resulted in higher profits and strong business model of US competitiveness. Warranty cost per unit declined 75 percent. Labor expenses decreased by 70%. Case study proves that design simplification is fundamental and highly effective strategy for negating the effect of cheap foreign labor.
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What can we discover about this part that would be useful in understanding the true costs of manufacture and the true costs of outsourcing?

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Questions?
See www.dfma.com for more information
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