Cognizant 20-20 Insights

Optimizing Product Realization Costs

Across the Value Chain
By leveraging various cost optimization enablers, global automotive,
aerospace, discrete manufacturing and medical device companies
can identify and optimize costs holistically across the product
lifecycle, thereby improving safety, environmental and regulatory
compliance, sustainability and quality of products.
Executive Summary
Automotive, aerospace, discrete manufacturing
and medical devices companies face numerous
business challenges daily. Shrinking profit
margins (due to unrelenting competition) and the
movement of manufacturing to lower-cost regions
are among the stiffest such challenges. Moreover,
amid these escalating pressures, companies need
to produce high-quality, differentiating products,
while remaining cost-effective.
Each product development phase uniquely
contributes to the companys cost equation.
Howeover, most product development companies
apply cost optimization inititiaves to individual
silos. To get more bang from these efforts, they
need to embrace a holistic view of cost optimization across the product realization value chain.
This white paper identifies and addresses the
various pain areas or factors contributing to cost
overruns across the product realization lifecycle.
The paper addresses the challenges within the

cognizant 20-20 insights | may 2016

four major phases of product realization in the

value chain:

Requirements and feasibility study.

Design, verify and validate.
Approve, manufacture and launch.
Post-market observation.
Apart from the enablers/best practices in each
product development phase, we also highlight
key industry trends. In our view, early adoption of
emerging solutions would help optimize product
costs and enhance growth prospects.

Product Cost Optimization Challenges

Based on our domain and engagement experience,
and discussions with multiple stakeholders across
industry functions, we discovered the full sweep
of factors that contribute to cost overruns
across the product development lifecycle, and
corresponding best practices to avoid such cost
overruns (see Figure 1, next page).

Cost Overrun Factors

Cost Overrun Factors and Avoidance Best Practices

Requirements &
Feasibility Study

Design, Verify & Validate

Approval Manufacture &

Launch

Post-Market Observation

Inaccurate or
Incomplete
determination
of VOC or VOB.

Single source or long

lead items in BOM.

Increase in raw
materials costs.

Insufficient
post-production
monitoring.

Inadequate time spent

on requirements
management.

Poor data quality in

device trails and on
road testing.

Insufficient exploration
of concepts and
prototypes.

Multiple iterations in
design and testing.
Inadequate attention
to DFx requirements.
Lack of focus on
cost/value aspect
of design.
Initiating V&V efforts
after design is nearly
complete.
Manual approval/wet
signature for design and
test artifact approvals.
Test all for CSV/COTS
validation.

Ineffective root cause

analysis and incomplete
issue resolution before
releasing the product
after a recall.

Enable
knowledge-based
engineering to reduce
iterations.
Adopt DFx checklist
for analysis.
Risk-based CSV/COTS
validation.
Early involvement
of V&V to identify
requirements defects
early.
Adoption of electronic
document management
systems and test
management systems.

Avoid single source

or long lead items; if
unavoidable, plan for
adequate inventory.

Integrated quality
management system
that stresses active
vigilance.

Plan and approach

manufacturing phase
using optimization
tools.

Use analytics to
preempt failures.

Thorough root-cause
analysis before
re-releasing the product
to the field after
a recall.

Best Practices to Avoid

Cost Overruns

Spend adequate time on

VOC/VOB and
requirements cascade.

Complete requirements
analysis before
proceeding to design.

Latest
Thinking

Social Media
PLM Integration

Usage of quality control

techniques like Six
Sigma and Lean
manufacturing.

Working with contract

manufacturers by
outsourcing work.

CAE PLM Integration

3-D Shape Search

Optimize Product Cost

Using Big Data Analytics

Connected Vehicles and

Internet of Things

Figure 1

the start of the project, and inadequate time

spent on requirements due to strict timeline
commitments.

Ideation: Requirements Management Stage

The successful realization and marketing of
any product is dependent on capturing correct
requirements as early as possible in the lifecyle.
Faulty requirements during product development
constitutes nearly 40% to 60% of total errors.
In our experience, cost overrun factors at the
ideation stage include the following:

Poor

requirements and document-management practices.

Neglecting

process and documents

accelerate working product development.

Lack of adequate dialogue with a regulatory

authority at an earlier stage of product development such as with the Federal Drug Administration (FDA) in cases concerning medical
device development.

The inability to accurately identify the voice of

customer (VoC) and voice of business (VoB) at

Product Realization Requirements

Typical Product Realization Requirements

Design & Risk

Management

Sourcing &
Manufacturing

Interface

Performance

Product &
Data Security

Service &
Installation

Labelling
Documentation

Packaging &
Shipping

Usability

Regulatory

Figure 2

cognizant 20-20 insights

to

Ideation Cost Optimization Enablers

Maintaining complete, correct, feasible and prioritized requirements within a requirements
management system can help optimize costs (see
sidebar below). Product lifecycle management
(PLM) systems, for example, typically come
equipped with requirements management
capability, which helps to:

Improve

product quality and provide better

traceability and risk management.

Improve compliance to regulatory standards.

Avoid rework and recalls, and ensure product

Typical cost overrun factors faced by product

development companies during the design, verify
and validation phase include:

Time wasted in iterations done during design,

design prototyping and prototype testing.

Inadequate

attention to design for x or DFx

(where x = manufacturing, testing, assembly,
etc.) requirements.

Designers unaware of how to focus on costs or

their value attributes.

Consideration

for verification and validation

activities after the requirements and design
activities are completed.

is on time to market.

A PLM accelerator for socio-interactive

automotive product development helps car
makers acquire and apply social media feedback
in a structured and meaningful way in their PLM
systems during car platform development.1
Integrating
systems-engineering
capabilities into PLM improves collaboration between
various departments of product development
(mechanical, electrical and software design).2

Design/Verify/Prototype Stage
Design is another critical phase in the product
realization value chain. Approximately 70% of
the product costs are fixed during its design.3

Design Stage Cost Optimization Enablers

Product companies can adopt our knowledgebased engineering and VA-VE framework
(see Figure 5, page 5) to effectively:

Improve integration between computer-aided

design (CAD), computer-aided manufacturing
(CAM) and computer-aided engineering (CAE)
systems.

Optimize products using what-if scenarios.

Improve time to market.
Reduce, rework and reuse design knowledge.

Quick Take
Integrated Requirements Management for a Global Automotive Major

Business situation: A global automotive major

was using legacy systems to manage requirements. As a result, its engineers were spending
an inordinate amount of time fetching data and
managing requirements.

Benefits:

As a result of the integration, the

automotive major could:

>> Easily maintain, manage and fetch the re-

quired information with regard to standards

and regulations.

Solution: A bidirectional integration of the PLM

>> Conduct

root-cause analysis with reduced

lead time.

tool with the legacy system was developed.

Earlier, the company used two-plus Java-based
applications for requirements gathering,
supplier management, manufacturing bill of
materials control and CAD management. Using
Teamcenter PLM, we were able to integrate all of
those functions into a single tool and reduce the
number of applications and approvals/signoffs,
with improved visibility and transparency.

cognizant 20-20 insights

>> Reduce the number of applications.

>> Increase operational visibility and transparency.

>> Manage regulatory and standard-process-related information in a centralized repository.

 Create

>> Improve

Improve functional focus and value.

Create sustainability and reduce costs:

>> Reduce

design, validation and verification

standards.

safety, ergonomics, usability and

process efficiency.
the total number of parts in an
assembly.

Traditional and Knowledge-Based Engineering (KBE) Design

Empirical & Analytical
Knowledge About the System
Design Inputs

Design Outputs

Design Inputs

KnowledgeBased Design
Aid

Design Outputs
Design Verify,
Validate & Launch

Source of
Knowledge
Design Verify,
Validate & Launch

Production
Redesign
Loops

Production

Post-Production
Maintenance

Post-Production
Maintenance

Figure 3

Quick Take
Automated Design Verification and Validation at a Global
Automotive Major

Business situation: A global automotive major

was using a traditional and manual process for

design verification and validation. As a result
of this traditional process:

Benefits: As a result of automating the verifi-

cation and validation process, the automotive

major has:

>> Increased

efficiency and productivity, and

improved quality via repeatability and reproducibility.

>> Time was wasted in repeatable work during

design and prototyping.

>> Design knowledge was lost when employees

>> Re-stratified and effectively used engineer-

>> There was an absence of design verification

>> Effectively

left the organization.

ing manpower.

integrated its CAD and enterprise information systems.

and validation standards.

Solution:

>> Separated decision support from decision-

A proven, knowledge-based engineering framework was implemented that

automated the CAD-based verification and
validation process.

cognizant 20-20 insights

making activity.

>> Made product creation process automation

the primary driver.

Our Approach to KBE-Design Automation: CFAD

Input
Customer
Specification
Product Data

Knowledge
Formalization

Capture of
Engineering Knowledge

Knowledge
acquisition through
reports, design,
manufacturing,
performance and
maintenance
functions.
Captured knowledge
from business to
maintenance
activities & modeling
techniques.
Use of spreadsheet
for capturing
knowledge by
implementing
equations or rules
that enable
knowledge recycling

Output
Reports
Drawings
Costs
BOM
Manufacturing Plans
CAD Models/Assemblies

External Data
Catalogues
Tables
Materials
Analysis

KBE System for

Design Automation

Product Model
Geometry
Configuration
Product Knowledge
Engineering
Knowledge

Automation of
Engineering Activities

Interpretation of
acquired knowledge
into rules and
formalization to a
computer-implementation-friendly format.

Implementation
captured process,
rules & activities to
develop a KBE tool.

Follow iterative
process between the
capturing of
engineering
knowledge and the
automation of
engineering
activities.

Formalization using
a partner-company
approach. During
this activity the
implementation
structure i.e., a
hierarchical class
structure takes
shape.

Deploy Quality Control

of Engineering Activities

Testing of tool
and/or application by
allowing engineers
to design the
lifecycle properties
of the product.

Packaging &
deployment of
the tool.

Figure 4

Our VA/VE Framework: SMART

SMART

Problem
Statement

Measure

 Understand
customer needs.

 Define the defects

or issues.

 Define as is and
to be condition in
measurable terms.

 Gather baseline
information.

 Project charter.

 Critical to quality
customer
requirements.
 Process map.

Analyze

Reengineer

 Analyze info/data
collected for
evaluation.

 Develop
concepts/ideas for
better design.

 Identify top
contributors for
defects or issues.

 Finalize ideas and

perform detailed
design engineering.

 Set goal for

improvements.

 Perform cost
analysis.

Figure 5

cognizant 20-20 insights

Test &
Validate

 Validate design
using CAE analysis.
 Build functional
prototypes.
 Measure
performance of
new design.

PLM integrated 3-D shape search helps designers

in identifying parts of similar shape in the
enterprise databases. As a result, companies can
save time by avoiding rework.4 In the medical
device industry, 3-D printing is another instant
prototyping technology that has proven to be revolutionary. With the use of 3-D printing, surgeons
can design implants and instrumentation specific
to each patient. When doctors need to create a
new device on demand for rare, unpredictable
conditions, 3-D printing is applied.

Increase in raw materials cost.

Selecting single source for long-lead items.
Poor data quality in device trials and on road
testing.

Manufacturing Stage Cost Optimization

Enablers
Three enablers can be implemented for cost optimization at the manufacturing stage.

Optimize: Planning and approaching the man-

ufacturing phase using optimization tools for

raw materials optimization as well as costing
and supply chain optimization.

Manufacture
Manufacture and launch is another critical phase
in the device lifecycle. While requirements and
design set the foundation for a successful product
launch, costs incurred on manufacturing and the
supply chain can make or break a product launch.
Hence, cost optimization in manufacturing is of
prime importance. The factors that contribute to
cost overruns in this phase inclde:

Control:

Use of quality control techniques

such as Six Sigma and Lean manufacturing to
effectively reduce quality-related issues of the
devices produced.

Produce:

Working with contract manufacturers by sourcing design, manufacturing or

delivery to OEMs.

Cost Optimization Enablers: Manufacturing Phase

Optimize

 Raw Material Optimization

 Real-time Should-costing
 Supply Chain Optimization

Control






Six Sigma
Poka Yoke
Lean
SPC

Produce

 Contract
Manufacturing

Figure 6

The integration of manufacturing with product

development using analytics and big data helps
designers to take corrective and preventive
actions based on inputs from manufacturing
engineers.

Post-Market Stage
Product development companies spend billions
of dollars5,6 on product recalls (warranty- or
compliance-based). The cost of poor quality
affects the image of companies and erases profit

cognizant 20-20 insights

earned - due to litigation costs. Poor quality also

endangers the lives of customers.
Companies face huge warranty-, compliance- and
safety-related issues, while automotive companies
regularly face warranty and safety issues with
regard to various components. The causes:

Inefficiency and a lack of proactive vigilance.

Ineffective root-cause analysis.
Incomplete addressing of issues.
6

 Aging

complaints and corrective actions

preventive actions (CAPAs).

Integrated QMS and PDLC

Tr
ain
ing

Audit

Suppor
t

EA

tu
re

c
ufa
Man

Recall

FM

n, V&V
sig
De

ts
in
pla

au
nc
h

Com

Product
Realization
Value Chain
Aspects

Nonc
ent
om
e Ev
pli
ers
an
v
d
c
A
Ideate

PA
CA

Figure 7

Post-Market Cost Optimization Enablers

In our view, an integrated quality management
system (IQMS) can bring additional organizational effectiveness. Companies that have implemented IQMS achieve better on-time shipment
rates.7 Moreover, integration adds quality control
from conception through post market, and brings
more effective cross-functional colloboration

(between the design and quality departments, for

example). As a result, quality issues at the design
level can be addressed very early in the process.
Other benefits of IQMS include improved organizational effectiveness, successful new product
implementation (NPI), increased compliance,
reduced internal and external failure costs,
and reduced quality prevention and quality
assurance costs.
Automotive companies are now looking at an
integrated approach to collecting vehicle information using Internet of Things (IoT) technologies and connected vehicles to actively monitor
and advise customers on likely quality issues.8

Going Beyond
Any cost optimization inititiative without the
ability to view cost metrics is of little use. Enterprises typically do not visualize the benefits and
ROI of a cost optimization drive in a holistic way.
A single source of truth is necessary for analyzing
or viewing product costs, which can be obtained
through a cost analytics and reporting tool that
can communicate insights holistically across the
organization or enterprise.
An enterprise cost reporting system should be
ableto:

Interact

with all enterprise systems and

departments.

Quick Take
Product Cost Management at a Global Automotive Major

Business

situation: A global automotive

major was using a traditional system of product
costing:

Benefits: As a result of an integrated PLM/CAD

costing tool, the automotive major now can:

>> Get real-time cost information at every stage

>> CAD data moved between various departments such as design, sourcing and costing
through e-mails.

of the product lifecycle.

>> Broadcast a single source of truth with regard to cost.

>> Engineers did not have the most recent CAD

data for costing purposes.

>> Negotiate better with vendors with regard to

>> Delays in design changes due to cost overruns led to product rollout delays.

>> Help designers know the cost implications of

parts costs.

their designs, instantly.

Solution: A CAD-based costing tool was

developed that automatically generates tool
and manufacturing costs based on recognition
of CAD features.

cognizant 20-20 insights

Post-Market-Activity Categories

Proactive Vigilance & Reporting

Reactive Vigilance

Competitor-Initiated Product Recall,

MAUDE Database

Regulator-Initiated Recall

Competitor-Related Quality Incidents

Quality Incidents

Recall Report Analysis

Adverse Event

Figure 8

Track

and analyze cost for various product

configurations.

Report cost data across the enterprise.

Search and identify various cost components
with ease.

Looking Forward
Any effective product cost optimization program
is an amalgamation of effective people using
efficient tools to drive effective processes.
Product cost optimization is a by-product of
efficiency and a never-say-die attitude embedded
in an organizations culture.

Todays product teams focus not only on

products features and their performance,
but also on cost, safety, environmental and
regulatory compliance, sustainability, quality and
other factors that impact the design process.
Continuous monitoring of cost across the product
realization value chain can help identify key cost
drivers. With this knowledge, a product design
team can deploy control measures to optimize
costs through multiple tools and methodologies,
as discussed in the paper. Enterprise product cost
optimization brings the focus on creating a win-win
outcome for product development companies and
their suppliers, at an optimum cost for customers.

Enterprise Cost Reporting

Product Lifecycle
Management (PLM)

ENGINEERING

Enterprise Resource
Planning (ERP)

RESEARCH &
DEVELOPMENT

PRODUCT COST
MANAGEMENT

SOURCING

Supply Chain
Management (SCM)

MANUFACTURING

Material Requirements
Planning (MRP)

COST ANALYSIS

Source: http://resources.apriori.com/h/
Figure 9

cognizant 20-20 insights

COST DATA MINING

COST TRACKING

COST REPORTING

Quick Take
Proactive Vigilance in Medical Device Quality Management Systems
A working QMS is part of reactive vigilance which
triggers a chain of events back to the PDLC only
when quality issues are discovered in the product.
Medical device companies should be encouraged
to go a step further and be proactive in following

product recalls or incidents of other competitors

in the same product category.
Such vigilance would provide valuable learning
that would ensure quality issues are addressed
proactively.

Footnotes
1

http://www.cognizant.com/InsightsWhitepapers/a-PLM-accelerator-for-socio-interactive-automotiveproduct-development-codex1204.pdf.

http://www.plm.automation.siemens.com/en_us/products/teamcenter/systems-engineering-software/.

Design determines 70% of cost? A review of implications for design evaluation. J.A. Barton, D.M.
Love and G.D. Taylor.

http://www.plm.automation.siemens.com/en_us/products/open/geolus/.

http://www.catlin.com/flipbook/product-recall/files/inc/382055422.pdf.

The Business Case for Medical Device Quality, by Ted Fuhr, Katy George, Janice Pai,
www.mckinsey.com.

Network Polymers and IQMS: A Mixture of Success, http://www.iqms.com/company/network-polymers/.

Design for Manufacturings Internet of Things, https://www1.cognizant.com/content/dam/Cognizant_

Dotcom/article_content/Services/Designing-for-Manufacturings-Internet-of-Things.pdf.

Reference

Requirements

Management: The Interface Between Requirements Development and All Other

Systems Engineering Processes, by Colin Hood, Simon Wiedemann, Stefan Fichtinger, Urte Pautz;
Springer, 2008.

cognizant 20-20 insights

About the Authors

Madan Unde is a Senior Manager of Projects within the Product Engineering Practice of Cognizants
Engineering and Manufacturing Solutions business unit. He has over 13 years of engineering industry
experience, working in both the engineering OEM as well as engineering services spaces. Madans
work experience spans industries, from life sciences (medical devices), high-technology, and industrial
automation, through machine tools. In these roles, he has provided solutions across various technical
areas such as product design and development, innovation (front end), continuous improvement,
complaints investigation and resolution, CAPA management and product sustenance engineering.
Madan is well acquainted with medical devices standards such as ISO13485 and ISO14971, and practices
such methods as Six Sigma, DFx, risk management, and value engineering/value analysis and problem
solving. Madan holds a mechanical engineering and industrial engineering post graduate degree from
the University of Puneand is a certified Six Sigma Black Belt Professional (MSME India) and Value Engineering Associate Value Specialist (SAVE & INVEST). He can be reached atMadan.Unde@cognizant.com.
Murali Krishna is a Manager of Projects within Cognizants Engineering and Manufacturing Solutions
business unit. He has 11-plus years of experience in building CAD-to-CAE and CAD-to-CAM data interoperability solutions, product cost management, geometric search and knowledge-based engineering
solutions. Murali has vast experience in creating frameworks for automotive design verification and
validation. He has worked extensively with automotive, high technology and manufacturing companies
to provide the best solutions for their data interoperability needs. Murali has authored technical papers
in the fields of CAD, CAM and CAE. He has a bachelors degree in mechanical engineering from College
of Engineering, Guindy. Murali can be reached at Muralikrishna.AV@cognizant.com.

About Cognizant
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