cost reduction: inventively reducing the cost of the bill of materials

COST REDUCTION:INVENTIVELY REDUCING

THE COST OF THE BILL OF

MATERIALS

"A Crash Course on Reducing Costs in Electronics

Products”

www.sig-hq.com

Property of The Strategy + Innovation Group

MANUFACTURING COST BREAKDOWN

10%

30%60%

TYPICAL MANUFACTURING COST FOR

ELECTRONICS ASSEMBLIES

Labor Variable O.H. Materials

Source: David R. Dixon, PE, CPIM, Extreme Lean™: How to Keep Jobs in America, Society of Manufacturing Engineers, WESTEC 2004

Proceedings.

OBVIOUSLY THE REAL OPPORTUNITY IS IN LOWERING THE COST OF MATERIALS

FOR PRODUCING AN ELECTRONICS PRODUCT, NOT IN REDUCING THE COSTS

FOR LABOR (SOMETIMES THE REASONING FOR OUTSOURCING)


2

COMBINING VALUE ANALYSIS AND

INVENTIVE METHODS TO LOWERING

PRODUCT COSTS

USE VALUE ENGINEERING WITH FUNCTIONAL ANALYSIS TO

ANALYZE, UNDERSTAND AND FOCUS YOUR COST REDUCTION

EFFORTS:

USE IT TO FIND FOCUS FOR KEY AREAS TO INNOVATE

USE IT IN REVERSE, TO IDENTIFY SPECIFIC SOLUTIONS FOR UNDERLYING

PROBLEMS.

IT IS PARTICULARLY WELL SUITED FOR PHYSICAL AND MECHANICAL

PROBLEMS, BUT CAN ALSO BE USED IN OTHER AREAS LIKE SEMICONDUCTOR

DESIGN, PACKAGING, AND PROCESSES WHERE PHYSICAL DESIGN AND

PROCESS WINDOWS CONFLICT – NOT COVERED IN THIS PRESENTATION


3

WHAT ARE THE BEST

METHODS FOR REDUCING

BOM / MATERIAL COSTS?

- IT DEPENDS ON WHO IS RESPONSIBLE FOR

LOWERING THE COST AND HOW THEY’RE GOING TO

REDUCE THOSE COSTS


4

THERE ARE NUMEROUS BOM COST REDUCTION

STRATEGIES (NOT IN ORDER OF EFFECTIVENESS):

1. Negotiate with suppliers and make commitments to buy larger

quantities over time in order to get better pricing without an initial

investment.

2. Group BOM components using one or both of the following criteria

By type of component, (example: capacitors, microprocessor, inductors,

resistors, transistors etc…)

By vendor / manufacturer - Start looking for common components. These can

be as simple as looking for 1uF value capacitors. Look for components with

an adjacent value. There might be an opportunity in the design to use a larger

or smaller component without impacting functionality – check with the

electrical engineer. Look for lower cost alternatives and ask for volume

discounts.

Typically Responsible People: Materials Program Manager, Commodity

Manager, or Materials Buyer


5

THERE ARE NUMEROUS BOM COST REDUCTION

STRATEGIES (NOT IN ORDER OF EFFECTIVENESS): CONTINUED

3. Split your product into a core product with optional add-ons to reduce

the base-price for entry-level customers. This will many times increase

the number of SKU’s and/or require a complete product repositioning

4. Look for areas of your design where some parts are potentially

unnecessary. For example any non load-bearing parts may be trimmed

and glued in place rather than using screws or bolts. Fewer or smaller

parts may be used in some areas, etc…

5. Look for alternate materials and alternate parts that achieve the same

function without compromising the product design goals / functionality

STRATEGIES #4 AND #5 ARE WHAT WE’RE GOING TO FOCUS ON FOR

THIS PRESENTATION

Typically Responsible People: Marketing

Typically Responsible People: Product / Design Engineer and

Manufacturing Engineer


6

EXAMPLE: SERVER SYSTEM BOM COST

REDUCTION

INTEL DESIGNED SERVER

“SITKA- CABRILLO”:

SC450NX

SITKA MOTHERBOARD

SITKA MEMORY

BOARD


7

EXAMPLE: MEMORY BOARD FROM A SERVER

SYSTEM


8

SITKA MEMORY BOARD

Analysis of the BOM showed that there were 3 each

THMT (Through Hole Mount) Holders – not shown -

to hold down all 13 Tall THMT Capacitors.

When analyzing board circuit routing, it was found that

the THMT holders were constraining the available board

real estate for the routing – holes needed for the holder

to mount to the printed circuit board and secure the

capacitors in place

Each of the THMT Holders cost ~$0.55/piece (expensive

for a piece of injection molded plastic right?)

~$20,000 NRE cost associated with any design change

to the mold for the injection molded parts (another

undesired cost adder)

Supplier suggested solution didn’t fit board layout needs

and was too expensive an option to consider realistically

Decision Point: the Engineers opted to redesign the Tall

THMT Holder instead

STEPS FOR REDESIGNING A TALL

CAPACITOR THMT HOLDER

1. What is the Ideal Final Result (IFR)?

2. What does the Functional Model look like?

3. What is preventing us from achieving the IFR?

The list of problems, obstacles or challenges that are our problem

focus list

4. What are the contradictions?

These contradictions or design conflicts can be resolved by using a

contradiction matrix that you can find in TRIZ (Theory of Inventive

Problem Solving)

5. What are the suggested potential solution paths?


9

https://en.wikipedia.org/wiki/TRIZ

STEPS FOR REDESIGN

1. What is the Ideal Final Result (IFR)? A capacitor THMT holder that does

not consume any board real estate and is low cost OR no THMT holder

2. What does the Functional Model look like?


The list of problems, obstacles or challenges that are our problem focus

list




Problem Solving)



10

FUNCTIONAL MODEL

“AS IS”

THMT

Holder

THMT

Capacitors

PCB(Printed Circuit

Board)

Holds

HoldsHolds

Consumes

Legend:

Necessary Function

Excessive Function

Harmful Function

Insufficient Function


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FUNCTIONAL MODEL

“SHOULD BE”

THMT

Holder

THMT

Capacitors

PCB(Printed Circuit

Board)

Holds

HoldsHolds

Legend:

Necessary Function

Excessive Function

Harmful Function


Consumes


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STEPS FOR REDESIGN



2. What does the Functional Model look like? – see Functional Model

“Should Be” slide


The list of problems, obstacles or challenges that are our problem focus

list




Problem Solving)



13

FUNCTIONAL MODEL

“SHOULD BE” = THE IDEAL FINAL RESULT

THMT

Holder

THMT

Capacitors

PCB(Printed Circuit

Board)

Holds

Holds

Legend:

Necessary Function

Excessive Function

Harmful Function



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IFR #1

THMT

Holder

THMT

Capacitors

PCB(Printed Circuit

Board)

Holds

Holds

Holds

IFR #2

Note: There were two different ways of modeling

the Ideal Final Result, thus why you can model it

in either way we have them represented here

STEPS FOR REDESIGN






We need to hold capacitors in place during the manufacturing process, shipping

and handling and must pass a shock and vibe test – either the THMT Holder

holds the capacitors, and the capacitors hold the THMT or not (IFR 1 or 2)hat




Problem Solving)



15

STEPS FOR REDESIGN







and handling and must pass a shock and vibe test – either the THMT Holder





Problem Solving) – we’re going to use software to speed up the process



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DEFINING CONTRADICTIONS

Use the different definitions of each of the engineering system parameters of

performance of the system in question (see above for a software generated list of 50

different parameters) that are in conflict with one another. Focus your thinking on

what you want to improve that is working against or preventing/stopping you from

achieving your Ideal Final Result


Image Source: Software Matrix 2011 parameters from Systematic-Innovation.com 17

STEPS FOR REDESIGN







and handling and must pass a shock and vibe test - either the THMT Holder



Engineering Performance Parameters in conflict with one another:

Strength versus Stress/Pressure, Reliability/Robustness, Manufacturability,

and Other Harmful Effects generated on the system



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SUGGESTED INVENTIVE PRINCIPLES FOR SOLVING

THIS SAME TYPE OF PROBLEM IN ANOTHER INDUSTRY,

TECHNOLOGY OR SCIENCE

Instead of typical “blue sky”, random, trial and error brain-storming on how to solve

the problem (because now you’re focused on the underlying conflict in the design,

you also know with certainty that you’re solving the right problem). And because

you’re enabling the use of a very specific list of Inventive Principles that have solved

this same type of problem before that one has in their current design – gives what

we call “creative confidence” to the designer/engineer that they can solve the

problem at hand


Image Source: Software Matrix 2011 suggested inventive principles from Systematic-Innovation.com 19

SUGGESTED INVENTIVE PRINCIPLE:

#40 COMPOSITE MATERIALS

DEFINITIONS WITH EXAMPLES

A. Change from uniform to composite (multiple) materials where each material is optimized

to a particular functional requirement

- Aircraft structures where low weight and high strength are required. (With fibers aligned according

to loading - including multiple layers of fibers aligned in different directions.)

- Composite golf club shaft aligns structures to give low weight, high shaft-wise flexibility and high

torsional stiffness

- Concrete aggregate

- Glass-re-enforced plastic

- Fiber-re-enforced ceramics

- Hard/soft/hard multi-layer coatings to improve erosion, etc.. properties

- Non-stick coatings on cooking pans

Use the definition of the Inventive Principles and the examples to focus your mind’s

imagination on thinking how you could apply this Inventive Principle to solve your

problem


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#35 PARAMETER CHANGESDEFINITIONS WITH EXAMPLES

A. Change an object's physical state (e.g. to a gas, liquid, or solid)

- Transition from mechanical to fluid or electrical drives

- Freeze the liquid centers of filled candies, then dip in melted chocolate, instead of handling the messy, gooey, hot liquid

- Transport oxygen or nitrogen or petroleum gas as a liquid, instead of a gas, to reduce volume

- Dry ice - Ice cubes - Jelly

B. Change concentration or consistency

- Liquid versus bar or powder detergents - Concentrated or de-hydrated orange juice makes transportation easier

- Abradable linings used in seal design

C. Change the degree of flexibility

- Use adjustable dampers to reduce the noise of parts falling into a container by restricting the motion of the walls of the

container

- Vulcanize rubber to change its flexibility and durability - Compliant brush seals rather than labyrinth or other fixed

geometry seals

D. Change the temperature

- Raise the temperature above the Curie point to change a ferromagnetic substance to a paramagnetic substance.

- Cooking/baking/etc - Lower the temperature of medical specimens to preserve them for later analysis

E. Change the pressure

- Pressure cooker cooks more quickly and without losing flavors - Electron beam welding in a vacuum - Vacuum packing

of perishable goods

F. Change other parameters

- Shape memory alloys/polymers - Use Curie point to alter magnetic properties - Thixotropic paints - Rheopexic fluids


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#5 – MERGINGDEFINITIONS WITH EXAMPLES

A. Physically join or merge identical or related objects, operations or functions

- Automatic rifle/machine gun

- Multi-colour ink cartridges

- Multi-blade razors

- Bi-focal lens spectacles

- Double/triple glazing

- Strips of staples

- Catamaran/trimaran

B. Join or merge objects, operations or functions so that they act together in time

- Combine harvester

- Manufacture cells

- Grass collector on a lawn-mower

- Mixer taps

Sometimes you don’t get ideas right away, (stress is not good for creative thought),

but by doing something else rather mundane after you’ve done the focused

brainstorming, like showering, doing the dishes, driving to work/home, gardening,

etc… enables the mind to free up and the conceptual dots connect and then the

ideas just seem to come to you since you’ve already seeded the mind with

Inventive Principles


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#17 – ANOTHER DIMENSION


A. If an object contains or moves in a straight line, consider use of dimensions or movement outside the line

- Serrated or scalloped edges on a knife blade or hole punch - Application of fade or draw to the affect the trajectory of a

golf ball

- Paper edges clipped or made bigger in order to facilitate ease of location of entries in an address book, or for file dividers

- Curved bristles on a brush - Coiled telephone cable

B. If an object contains or moves in a plane, consider use of dimensions or movement outside the current plane

- Pizza-box with ribbed (as opposed to flat) base - Spiral staircase uses less floor area

- Introduction of down and up slopes between stations on railway reduces train acceleration and deceleration power

requirements

- Black keys higher than white keys on a piano to facilitate ease of location when playing

- Conical instead of plain flange joint - Paper clip works by being deflected out of plane

C. Use a stacking arrangement of objects instead of a single level arrangement

- Cassette with 6 CD's to increase music time and variety - Electronic chips on both sides of a printed circuit board

- Multi-storey office blocks or car-parks

D. Re-orient the object or system, lay it on its side

- Heels on a shoe alter height and leg-shape of wearer - Hang a mirror with corners (rather than edges) top and bottom to

cater for greater variety of user heights - Take a door off its hinges to plane top and bottom surfaces to size

E. Use 'another side' of a given object or system

- Press a groove onto both sides of a record - Mount computer chip components on both sides of a silicon card

- Print text around the rim of a coin

- Fix a leaking car radiator or pipe by adding fluid sealant to the inside rather than trying to seal from outside


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#25 – SELF SERVICE


A. Enable an object or system to perform functions or organize itself

- A soda fountain pump that runs on the pressure of the carbon dioxide that is used to "fizz" the drinks.

This assures that drinks will not be flat, and eliminates the need for sensors

- Halogen lamps regenerate the filament during use--evaporated material is re-deposited

- Self-locking nut

- Self-cleaning oven

- Self-balancing wheel

B. Make use of waste resources, energy, or substances

- Use heat from a process to generate electricity "Co-generation"

- Use animal waste as fertilizer

- Use food and lawn waste to create compost

Of course not all suggested principles necessarily will fit your specific problem, just

look at as many of the most likely relevant Inventive Principles to get you going down

the best solution path. Please note because the Inventive Principles were derived

from only the most innovative of patents and the laws of physics, you’ve got some of

the most inventive minds actually working with you to help generate a solution to

your problem/design conflict


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#4 – ASYMMETRY


A. Where an object or system is symmetrical or contains lines of symmetry, introduce asymmetries

- Introduce a geometric feature which prevents incorrect usage/assembly of a component (e.g. earth pin on electric

plug)

- Asymmetrical funnel allows higher flow-rate than normal funnel

- Put a flat spot on a cylindrical shaft to attach a locking feature

- Oval and complex shaped O-rings - Coated glass or paper

- Introduction of angled or scarfed geometry features on component edges

- Cutaway on a guitar improves access to high notes

- Spout of a jug - Engine Cam - Ratchet

- Airfoil - asymmetry generates lift - Eccentric drive - Keys

B. Change the shape of an object or system to suit external asymmetries (e.g. ergonomic features)

- Human-shaped seating, etc

- Take account of differences between left and right handed users

- Finger and thumb grip features on objects

- Spectacles

- Car steering system compensates for camber in road

- Wing design compensated for asymmetric flow produced by propeller

C. If an object or system is already asymmetrical, increase the degree of asymmetry

- Use of variable control surfaces to alter lift properties of an aircraft wing

- Special connectors with complex shape/pin configurations to ensure correct assembly

- Introduction of several different measurement scales on a ruler


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#6 – UNIVERSALITY


A. Make an object or system able to perform multiple functions, eliminating the need for

other systems

- Child's car safety seat converts to a stroller

- Home entertainment center

- Grill in a microwave oven

- Radio-alarm clock

- Swiss Army knife

- Work-mate

- Universal joint

- Electrically conducting clothing enables many new functions to be delivered

- Use of Standards in e.g. data exchange

- Cleaning strip at beginning of a cassette tape cleans tape heads

It’s important for you to know (based on research in the field), that by

combining more of the Inventive Principles together (2-3) you usually get a

stronger / better solution. The point is to get your creative juices flowing, to out-

think/out-create the problem – this is engineering excellence and is actually the

funnest part of engineering and design


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STEPS FOR REDESIGN1. What is the Ideal Final Result (IFR)? A capacitor THMT holder that does






and handling and must pass a shock and vibe test - either the THMT Holder



Engineering Performance Parameters in conflict with one another:

Strength versus Stress/Pressure, Reliability /Robustness, Manufacturability,

and Other Harmful Effects generated on the system


Principles: #40 – Composite Materials, #17 – Another Dimension, #4 –

Asymmetry, #5 – Merging, #25 – Self Service and #6 - Universality


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EXAMPLE: REDESIGNED THMT HOLDER ON A

MEMORY BOARD LOWEST TOTAL COST SOLUTION THAT

Saved valuable board real estate

Each Lexan tape solution: ~$0.11/piece

Total BOM cost reduction/board: $1.32/bd

Total BOM cost reduction across platform by

volume (assume 50,000 units/ year): $66,000.00

No NRE costs – saved $20,000.00

Total Cost Benefit: $86,000.00 in the 1st year

A patentable solution – which cannot be

overstated in it’s value to you/your company,

because you can now go out to other

companies or vendors and license the

intellectual property (IP). With this knowledge

even a small company can make revenue from

IP royalties, a good IP lawyer helps too!


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Additional Important Notes:• This was a relatively low volume

product, the higher the volume a

product is the higher the cost

benefit

• When this approach is used on high

cost components the benefits are

higher too.

REDESIGN COSTS ARE THE LOWESTVALUE: “WHAT IS THE COST OF NOT DESIGNING OUT THE HIGHER COSTS OF A BOM?”

Using an Inventive approach to Redesign saves significant time in the process of redesigning

as well as significant cost savings for you/your company, and can even generate revenue in

unforeseen ways

COST TO REDESIGN: TRAINER, TRAINING TIME AND SOME SOFTWARE

Time of 2-3 engineers (minimum #) who are trained in the correct use of Inventive Methods

Cost of an experienced Engineer-Instructor suggested to teach TRIZ – having learned

initially on my own, and then getting experienced instructors provided better

engineering/design outcomes

There are many Systematic Innovation or TRIZ instructors out there, go find the best one to train your

engineers/problem solvers for you/your organization – not all are created equal; some will try and train

your team on everything in the tool box, or not show you enough to be successful

Low cost Systematic Innovation software (Less than $1000.00 USD), we recommend

www.systematic-innovation.com’s software

APPROACH: TRAINING INCLUDES REAL PROBLEM SOLVING AND MULTI-DISCIPLINARY

Important to have the right staff who can do the work - Typically a multi-disciplinary

approach of engineers working together can do this from design and the manufacturing

domains


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http://www.systematic-innovation.com/

FINAL COMMENTS / NOTES

There are additional tools in the TRIZ (Theory of Inventive Problem Solving) body

of knowledge. We’ve just covered a few of the tools to give you a bit of a taste of

how to see the value for yourself with the example of applying some of the

methods in a Materials / BOM cost reduction effort.

If you’d like to know more about how to Redesign Inventively or just how to use

Inventive Methods, or Systematic Innovation / TRIZ to solve tough or complex

product or process problems in manufacturing or design, just let us know.

As for myself; I’ve been using and training the methods for 17 years, successfully

training >900 engineers, scientists and program/project managers, as measured

by $300M in savings and benefits – you can find me or the rest of the team on

LinkedIn at the Strategy + Innovation Group or you can contact me directly via

LinkedIn.

Best of luck in your “Driving Innovative Solutions that Work”

-Richard Platt

SENIOR MANAGING PARTNER


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https://www.linkedin.com/in/richardplatt

cost reduction: inventively reducing the cost of the bill of materials

Engineering

cost of materials

strategy innovation

costs property

cost reduction efforts

typical manufacturing

manufacturing cost breakdown

group bom components

materials buyer property