One of the hallmarks of direct materials sourcing in discrete manufacturing is the typical percentage of spend that is “locked in” during the design process – it can be has high as 90-95%. In other words, the design decisions that engineers make are also the “cost decisions” that procurement and the business must live with. These include factors that span materials, tolerances, processes, dimensions, durability and many other requirements.
There are numerous means of overcoming the challenge of cost that is engineered into the product equation, including introducing greater cost knowledge to those engaged in the design process and bringing procurement in as early as possible. It can also be helpful to make design engineers aware of total cost factors impacting design decisions. One example is the need to purchase certain items in container load quantity for custom parts to achieve pricing breaks or the need to carry additional inventory if a specific item can only be bought overseas and there is no local distribution.
Yet beyond unit cost and total, we also “lock in” other factors when designing products as well – including many factors that impact corporate social responsibility and the ultimate non-price cost a customer is willing to pay given adverse environmental impacts. As with hard cost, the key to improving things in in this area is getting better information into the hands of design engineers in manufacturing and product designers in other fields.
But where to start?
I recently read that the Outdoor Industry Association Sustainability Working Group (OIA SWG) has introduced a new information offering, a “Rapid Design Module,” to its members. The tool “provides guidance to product designers around the potential environmental impacts of decisions during the product creation process.” Other supply chain risk and information providers like Ecovadis have also built databases of supplier information and practices related to corporate social responsibility.
Regardless of tool or information source, just as procurement has gotten better at driving cost information further upstream to impact design decisions, so must it drive information to make better decisions that impact supply chain risk and corporate social responsibility as well.