Steps Involved In Cost

Reduction
1.Generation of ideas
Brainstorming
Group of people sit together and discuss
their ideas about where and how to reduce
cost.
Benchmarking
Another way of reducing cost is selecting
another product as a benchmark and
trying to adopt it in our product.
2.Feasibility study
The following factors are considered while
short listing the ideas generated.
Economical factors
Technological factors
Availability
Ability to adopt
Logistics involved
Economical Factors:
The expenses
involved in the cost
reduction must be
justified by the returns
that are generated by
cost reduction.
Technological factors
The ideas suggested
should be
technologically
feasible and that
technology should be
available at the plant.
Availability

Considering
supplier change
to be the idea
selected, the new
supplier should
be able to supply
the component
within the
stipulated time
period.
Ability to adopt

The existing
stock should be
used up and
only then the
new part can be
adopted. The
adoption should
be on a certain
date so as to
effect the
maximum cost
savings.
Logistics
involved
The transport of
the component
from the supplier
to the plant, the
time for the
transport and
problems
associated with
it are taken into
consideration.
3.Selection of ideas
Based on the factors taken into account, the
ideas that are feasible and contribute to cost
reduction are taken for further study and
implementation.
The changes are implemented and the
design is passed on for design validation.
4.Validation of changes
The changes that are implemented are
validated according to :
DFMEA
Quality check
Performance check
Production feasibility

DFMEA
DFMEA is Design Failure Mode Effect Analysis.
It points out each failure mode associated with
the component, and the effect that the failure
may cause, and remedial measures.
Severity (S), Occurrence (O) and Detection (D)
for each component should be found out.
RPN ( Risk Priority Number ) = S*O*D
Particular value of RPN for each component is
set.
Changes are made if RPN is greater than the set
value.
Quality check

The changed
part should
conform to the
preset quality
standards. If the
quality standards
is not achieved,
the idea is taken
back to the
design phase.
Performance
check
The performance
of the changed
part is checked.
The changes
should not affect
the performance
and the function
of the part in any
manner.
Production
feasibility
The changes that
are suggested
should be practically
possible in the
production phase.
This involves the
capability of the
plant, the constraints
in the plant and the
skill level of the
operators.

Approval
Each change should be approved by the
higher authorities concerned. Problems
faced during this stage are
Time delay
Paper work
Communication break down
Production trial
Plant Equipment
Operator skill
Operation time
Layout
Inventory level
Breakdown
Safety
Ergonomics
Methodology

Problems may turn up which were not
expected. They are

Plant
Equipment
The equipment
available at the
plant may not
be suitable for
carrying out the
desired
process.
Operator Skill

The operator may
not be skilled
enough to carry
out the operation.
This can be
rectified by hiring
the proper
operator or by
training the
existing operator
Tac Time

The required tac
time may not be
achieved which
will lead to the
desired level of
cost reduction.
Layout

The layout of
the plant may
be a reason for
some parts not
being able to
reach the
station on time.
This can be
rectified by
modifying the
layout.
Inventory level

The inventory
needs to be filled
always. If the
parts are not
available, the
production may
be stopped.
This can be
rectified by
holding buffer
stock or making
sure that the
stock level does
not reach zero.
Break down

The production
may be stopped
because of
unexpected
breakdowns in the
equipment.
This is remedied
by holding periodic
maintenances.