BACKGROUND
Our client achieved significant cost savings on the first generation of its engines during the ramp-up phase. The new-generation program now faces the same challenge, with increasing production volumes.
IAC has been tasked with comparing the two engines to identify and achieve tangible cost savings, using a structured Design-to-Cost approach.
THE IAC APPROACH
- Consolidation of the baseline and cost-saving ideas identified earlier by the client,
- Comparison of the design specifications, supplier type (BCC, etc.), and contractual framework with a similar product,
- Definition of a “should cost” target based on a similar product, with adjustments for architecture, design complexity, and volume effects,
- Facilitating workshops to identify cost drivers and opportunities for cost reduction,
- "Should-cost" analysis and ratios to evaluate savings resulting from design changes and estimate procurement levers (negotiation, supplier switching, etc.),
- Developing business cases for key ideas and defining scenarios based on ROI,
- Sensitivity analysis of cost savings relative to the production plan.
RESULTS
- 34% savings achieved with the recommended scenario,
- A detailed implementation plan for the next 4 years,
- Estimation of the production cost per engine based on the 4-year production plan.
