Companies are spending
too much money to perpetuate their globalist agenda and are squandering their
tax cuts. It is a nightmare to continue to design and manufacture the same
products in multiple locations.
It is best to
co-locate design and manufacturing in the same facility. Engineers need to be
close to manufacturing facilities that will be subject to new product
start-ups. Design is not an 8 to 5 job.
New product design is a 24-7 event. 12 hour days are required. It’s also good to remember Newton’s Laws of
Management that states: “Communication between engineers is inversely
proportionate to the distance they have to travel.”
All design components
need to be selected, received, prototyped and tested and tested again as
sub-assemblies and full assemblies. Electronic parts are subject to being
phased out and replacement components need to be selected. This complicates the
design and product maintenance processes. Software needs to be written and
tested the same way. Kernels degrade over time and need to be reprogrammed,
tested and installed in old products. Firmware needs to be written, installed
on the hardware and tested. Mechanical parts should be tested using Coordinate
Measuring Machines that laser test each part to match the design tolerances in
30 seconds.
When China offered to
build circuit boards for 50% of cost, most electronics manufacturers stopped
building circuit boards in the US and selected vendors in China and
elsewhere. It had been a nightmare.
Reject boards are routine. Communication with Chinese engineers is a hassle and
travel costs are high.
Companies like SAP,
who provide Enterprise-Wide System software continue to struggle with the
separation of business units in multi-national companies. This is a
self-inflicted house of cards. See below:
Design
Anywhere, Build Anywhere with Greater Product Cost Accuracy and Efficiency, by
Marion Heidenreich, 10/2/17, SAP
A Customer Case Study
A Customer Case Study
AutomotiveHigh TechPLM (Product Lifecycle Management)SAP
Product Lifecycle Costing Product Cost Managementproduct costing
Industrial machinery and
components manufacturers are facing increasing pressure to provide innovative,
customer-specific solutions at competitive prices, and the specialization of
customer requirements will only continue to grow.
Despite not having
detailed cost and product information at the initial stages of new-product
design, manufactures still need to have preliminary cost estimates. This is
relevant for all companies that require cost information for a product that is
being newly designed or that is planned to be the successor or a new version of
an existing product. Manufacturers want to evaluate the potential cost
elements, breakdown, and drivers that typically will iterate towards target
costs, along different milestones in the development project.
Designing and building
complex products to exacting customer specifications frequently involves heavy
engineering work. To ensure consistency of sub-assemblies and component parts
costs across all finished products, the cost structure should be modularized by
referencing the cost estimates of the parts that are used in different products
and components multiple times, or in different variants of the same product.
Additionally, industrial
manufacturers are often challenged by diverse business processes and data sets
across the organization, as well as diverse system landscapes due to organic
growth as well as M&A activities. In this situation, it is essential to
optimize costs through simulation and evaluation of production or supply costs,
as well as improve the cost structure of the organization. However, cost
experts often spend their time on gathering data rather than optimizing costs.
AGCO is an international
manufacturer of professional farm machinery that helps boost agricultural
productivity and reduce post-harvest waste. AGCO’s next generation solution for
precision agriculture connects the entire crop cycle from enterprise planning
to planting, crop care, harvesting, and grain storage. The company’s well-known
brands, such as Massey Ferguson, Challenger, GSI, Valtra, and Fendt, are all
built around the globe and sold through a network of over 3,000 dealers across
all regions.
AGCO has multiple
engineering design centers in North America, South America, Europe, and Asia
Pacific as well as more than 20 manufacturing locations worldwide. AGCO is
constantly innovating – designing new machines while improving existing
products. The development cycle from inspiration to implementation in the farm
field is typically two to five years depending on the complexity of the
project.
For AGCO, 80% of the
product cost are determined during the design stage. One of the last, untapped
cost optimization potentials resides in the early costing process.
AGCO is challenged by
diverse business processes, data sets, and system landscapes due to their
growth by acquisition. Due to multiple software systems and legacy tools, the
costing process is highly manual and error-prone. Aligning product costing with
design, sourcing, and manufacturing is challenging since all of these lines of
business must be coordinated across multiple sites for the same product. Again,
because of the complexity involved the cost expert’s time is spent gathering
and analyzing data rather than looking at strategic ways to optimize cost. To
get a consistent and transparent view on product costs, the company needed a
single solution that addresses multiple locations and companies, offering a
great user experience and high efficiency.
AGCO’s goal is to be able
to design anywhere, build anywhere, and do so as efficiently as possible.
To help reach this goal,
AGCO recently implemented the SAP Product Lifecycle Costing solution, which is
helping them establish a single global methodology for tracking and analyzing
new product costs that it can use at any of its design and manufacturing
locations worldwide.
SAP Product Lifecycle
Costing is integrated with AGCO’s several ERP and engineering systems. The
direct integration to design bills of materials (BOMs) and the integration to
SAP master data are essential to leverage the engineering and enterprise data
early in the product development process. Powered by the SAP HANA platform, SAP
Product Lifecycle Costing enables high performance and excellent transparency
across AGCO’s complex structures. Furthermore, AGCO uses the reference
calculation capability of the new solution to modularize cost structures by
referencing cost estimates of parts that are produced in-house or intercompany
and used in different assemblies and products, as illustrated below. This new
solution also helps AGCO achieve target product costs during new product
development projects.
SAP Product Lifecycle
Costing delivers a major step forward in the way AGCO manages product costs on
a global scale through: Harmonized
processes and consistency through a common tool; Increased transparency through
integrated reporting and analysis; Better accuracy through global system
accessibility; Increased efficiency through integration of legacy systems; Improved
user convenience through automation of repetitive tasks
With their new global
costing solution, AGCO now has a single standard costing process in place that
helps improve target cost achievement and helps significantly reduce product
cost for new projects. Furthermore, the increased efficiency of their cost
engineers gives AGCO more time to evaluate design concepts and make better
business decisions.
Read more about how AGCO is improving product cost accuracy and
profit margins with SAP Product Lifecycle Costing in their Business Transformation Story.
Listen and watch Nita Luiz, Senior SAP Product Lifecycle
Management Analyst at Varian Medical Systems, explain how the company
is using SAP Product Lifecycle Costing to strengthen the company’s ability to
innovate and perform at a high level in an ever-changing business environment.
Varian is also currently implementing SAP S/4HANA. https://youtu.be/fbAZrXJU6lg.
To learn even more about SAP Product Lifecycle Costing, please
visit: https://www.sap.com/products/product-lifecycle-costing.html
Marion Heidenreich is
working in the SAP Industrial Machinery & Components Business Unit focusing
on Finance, Procurement, and Business Networks. With almost 20 years of SAP
experience, Marion is well versed in business development, solution management,
and go-to-market strategies for discrete manufacturing industries.
Norb Leahy, Dunwoody
GA Tea Party Leader
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