The Cost of Innovation

In an effort to manage the product innovation lifecycle, engineers are now being asked to design to cost, adding new responsibilities such as comparing suppliers and evaluating manufacturing processes.

When it comes to product innovation, manufacturers readily pour massive amounts of money into R&D just to be sure they have an edge in their industry. In the beginning stages, the budget can be very loose for those enthusiastic CAD engineers who, glued to their desktop, are creating the next best thing, and, we think, are not worrying about what it would take to make.

Indeed, creative engineers are given a lot of leeway to design products that will inspire customers to buy. But the process involves many revisions, the introduction of new materials, and added product functionality. All of this brings more complexity—and cost—into the supply chain and into manufacturing. So, it’s no surprise that the people responsible for product innovation must now comply with cost management policies.

Engineers who have focused only on product form, fit, and function have recently been calculating a fourth “F”, as in finance.

“It is now up to the design engineers to meet target costs, or for the value engineers to take cost out of products on the market,” Stephanie Feraday, the president and CEO of aPriori, recently told me. And, she confirmed, this is a very new responsibility for engineers. “What put a laser point on this was the economy,” she said, “and the maturing of engineering processes.”

For example, engineers have been applying design–for-manufacturability principles for years, which means a product is designed in such a way that it is easy to manufacture. Now, they are being asked to “design to cost,” meaning that they must estimate in advance the total cost of producing the product.

So, when working away on 3D CAD, the designer is taking into account the cost of the materials and whether one supplier manufactures its parts better than another supplier. Not really an easy thing to do unless you have visibility into the suppliers’ manufacturing processes, machine volume, and even the materials they use.

Of course, I was having this discussion with Feraday because she was telling me about the aPriori enterprise cost management product, which can provide design engineers with the visibility they need, she said.

aPriori’s product ties into any CAD software, applying mathematical cost models to the Geometric Cost Drivers (GCD), which include any aspect of the product’s design that drives cost. These GCDs are evaluated within a model of the manufacturing processes; labor, materials, and production parameters are also considered.

The aPriori software not only applies mathematical models to materials and manufacturing processes, but it presents them in a virtual production environment. This is a simulated representation of a plant including every element, from electricity to lighting to people, that might impact cost.

The application has saved snowmobile and ATV maker Polaris Industries $800,000 in the first year of use, according to a customer testimonial video. Even more savings come from cost avoidance by getting the product right the first time, Polaris executives said.

But what really struck me is how peoples’ roles and responsibilities within an organization are changing.  Companies can no longer afford to let departments work in isolation. In this “integrated enterprise,” everyone—whether you are an engineer, a plant-floor operator, or a field service technician—-is responsible for making and saving the company money.

Manufacturing is actually going through its own reinvention, it seems, by creating a new culture of individuals who are cost-saving, revenue-generating innovators.

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