10 tips to minimize cost at the Design stage….

Bizplan03All companies need to be mindful of costs & for those producing products this is best done at the Design stage. Here are some suggestions:-


  • Before beginning the design a Product Specification is essential, this needs to have been agreed at Senior Management level.
  • The product design needs to meet the spec and no more.
  • The material choice is critical, why make it out of gold if steel will do.
  • Use minimum thickness, as long as the design meets the spec.
  • Reduce the number of components as much as possible.
  • Re-use existing design components wherever possible – this gives Purchasing negotiating strength over suppliers and reduces inventory.
  • Consider Manufacturing by minimizing the number of process steps in manufacture.
  • Hold regular Design reviews & involve other parts of the Organization.
  • Build a prototype to test the design.
  • If possible test the Design using Computer Aided Modelling.

If you need help minimizing cost at the Design stage feel free to get in touch.


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Jaguar Land Rover has a taste for Chinese #automotive

A new sales record of over 314k cars and profits of 1.5 billion GBP illustrate the success of British car maker Jaguar Land Rover and it’s innovative new products including the Range Rover Evoque which is selling like “hot cakes” at the moment particularly in China. In fact Jaguar Land Rover is opening a new dealership in China every week. China sales now represent almost 20% of the companies sales.

There is, however, another less publicised side to this story.

Since 2007 the British Pound  has devalued against the Chinese Yuan (or RMB)  by a whopping 56% as a direct result of the U.K Governments policy of Quantitative Easing. In March 2009 75 billion pounds was created electronically followed by another 200 billion pounds later that year. Further episodes of Q.E pumped a total of 325 billion pounds into the U.K economy, devaluing the pound & increasing exports.

It also goes a long way to explaining why foreign ownership of London property has increased 20% since 2009 & conversely why imported foodstuffs & other goods now seem outrageously expensive.



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Why YOU need a Project Manager #pmot

project managersSome organizations think they can run projects without a Project Manager

They believe that they can save money by having an engineer or administrator do the project managers tasks.

Here are some reasons why they are wrong:-

  • All projects need managing.
  • Project Management is a skilled profession which requires years of learning and development.
  • A professional Project Manager understands how a project should be structured to ensure success.
  • She will plan the project to minimize overall timescale.
  • He understands how to get “stuff” done.
  • A Project Manager makes team members life “easy” by scheduling activities & dealing with the politics & administration of the project.
  • He understand conflict resolution and mediation.

So what is the likely outcome of trying to manage projects on the “cheap” :-

  • The project will be structured poorly if at all.
  • The timeline will be extended extensively.
  • The inexperienced individual trying to manage the project will become completely overloaded & unable to cope with their own tasks.
  • Rather than being cheaper costs will escalate out of control.
  • Key deliverables will not be met.
  • Customers expectations will be compromised.
  • The business will be irreparably damaged.

If you really want to save yourself money hire the best project manager you can get.



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Lost opportunity cost…..#pmot…#in


In the last post we discussed risk aversion. One of the pitfalls of being too risk averse is lost opportunity cost.

In New Product Development Project Managers constantly balance time to market with product quality, resource management, project costs & a host of other competing factors.

In an effort to develop the perfect product with maximum process capability and meeting 100% customer satisfaction the real cost of lost opportunity is often missed.

Consider a product which on release will generate, on average,  $100,000 profit a month for 12 months. If the product release is delayed by 1 month the lost opportunity cost can be estimated as $100,000. What should be  emphasised is that this amount will NEVER be recovered. If the product lifecycle is estimated as being 12 months depending on the competition then releasing the product 1 month late reduces the lifecycle to 11 months.

If that lost $100,000 was invested at a compound rate of 5% per year over ten years it would be worth $163,000 !

So here are some tips to minimize lost opportunity cost:-

1) Invest in the project at the front end, providing ample resource and support.

2) Fix the product spec before the end of the design phase.

3) 100% perfection is great but 95% is normally good enough for most customers.

4) Make it easy for engineers by setting SMART (Specific, Measurable, Aggressive, Realistic, Timely) targets.

5) Publicise Project Milestone targets.

6) Communicate Lost Opportunity Costs.



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The difference between price & cost…#in..#pmot

price & cost

How many times have you inherited a project and had major problems with a supplier who was selected because they were cheap !

This perception of “cheap” is normally based purely on price and takes absolutely no account of the total cost of ownership of the product or service.

Selecting suppliers purely on price is never a good idea.

Here are some great tips from Businesslink:-

What you should look for in a supplier

There are a number of key characteristics that you should look for when identifying and short listing possible suppliers. Good suppliers should be able to demonstrate that they can offer you the following benefits.

Quality and reliability

The quality of your supplies needs to be consistent – your customers associate poor quality with you, not your suppliers. Equally, if your supplier lets you down with a late delivery or faulty supplies, you may let your customer down.

Speed and flexibility

Being able to place frequent, small orders lets you avoid tying up too much working capital in stock. Flexible suppliers help you respond quickly to changing customer demands and sudden emergencies.

Value for money

The lowest price is not always the best value for money. If you want reliability and quality from your suppliers, you’ll have to decide how much you’re willing to pay for your supplies and the balance you want to strike between cost, reliability, quality and service.

Strong service and clear communication

You need your suppliers to deliver on time, or to be honest and give you plenty of warning if they can’t. The best suppliers will want to talk with you regularly to find out what needs you have now and how they can serve you better in the future.

Financial security

It’s always worth making sure your supplier has sufficiently strong cashflow to deliver what you want, when you need it. A credit check will help reassure you that they won’t go out of business when you need them most.

Always remember the difference between price & cost



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Outsourcing at any cost ?…..

In July 2009 Sun Danyong comitted suicide by throwing himself from his 12th flloor apartment. Sun’s apartment had been ransacked and he claimed in a text, immediately before his death, that he had been badly beaten.

Sun worked for the massive Taiwanese CEM Foxconn (Turnover |$10 billion) which manufactures Apples iconic iphone. He was rumoured to have been suspected in the theft of an iphone prototype. The incident sparked an Audit by Apple but to date no visible action has been taken.

iphoneThis incident highlights the ethical dilemmas posed in Subcontracting. How do we deal with massive corporations which often dwarf our own ?  How do we balance the need to reduce manufacturing cost with the need to deal with undemocratic regimes with questionable human rights records ?

Do we do business at any price ?

Like most dilemmas the answer lies with the consumer. Western consumers are increasingly conscious of the ethical and environmental impact of their actions, where does that food come from, what is involved in it’s manufacture ? Who benefits and who gets hurt ?

This conciousness will extend to all areas of consumption including electronic products and it is those companies which pursue an active, ethical and evironmental policy which will ultimately benefit.


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The real cost of time to market delays….

p4Anyone involved in New Product Introduction (NPI) knows how critical time to market is but do they know how to quantify it?

If a product has a predicted lifecycle of x years the assumption must be made that sales will cease x years after product launch i.e at product “death”.

If the launch date is delayed by 2 months the original product “death” should remain the same. Any product will only be viable until its successor is released by its originator or the competition. The result is a loss of 2 months of sales which will have a real monetary value. This is a perfectly reasonable proposition as there is no logic in assuming that the competitors next product will be late just because yours is !

This enables us to quantify project delays in terms of real dollars. Great news for Senior Management but also good news for the project manager as it allows us to justify additional project resource or equipment in order to meet the original project timescales.

Remember – if your Senior Management has not provided the resource you budgeted for to bring the project in on time quantifying time to market losses in monetary terms is a great leveraging tool.

Chinese elves make manufacturing cheaper…

father-christmas In a press statement released today at 21.oo GMT Father Christmas  announced that, from today onwards, all toys will be manufactured by Chinese elves due to the increasing costs of employing elves at the North Pole. This has been exacerbated due to the effects of global warming and the shrinking ice cap making Real estate in the Northern Latitudes increasingly expensive.

Santa denied that product quality would be effected stating that toys will continue to be designed by Northern elves. Only the manufacturing operation itself is being subcontracted to China.

No member of the Chinese Goverment was available for comment and Santa catagorically stated “…this has absolutely nothing to do with the recent Copenhagen event & ,despite rumours to the contrary, I was not a participant”

Outsourcing is not an easy answer…


There is little doubt that outsourcing, when done correctly, can save money and inprove service but there are a number of things you need to be aware of when considering outsourcing:-

1) Product Quality – there are many in-house practices which are not documented which contribute to product quality. If  Product manufacture is outsourced these checks and balances will no longer be present and product quality will be adversely affected. It simply isn’t possible to document everything.

2) Hidden Cost – whereas unit cost will be cheaper (otherwise why do it) the overhead cost of managing and monitoring the Outsource supplier may be greater than anticipated, this needs to be closely monitored and managed.

3) Loss of I.P.R – It doesn’t matter what legal documents you sign some of your Intellectual property will be lost to the Outsource supplier and even end up in the hands of your competitors. You need to be aware of this.

4) Project Timescales –  Early Projects will suffer unplanned delays, this is an inevitable part of the learning curve.

5) Cultural Differences – these should not be underestimated and, if not clearly understood, will lead to confusion and misunderstanding.

Managing Ousource Projects requires experience and skill. You should seriously consider engaging an Outsourcing expert particularly in the early stages of the Project.


A light at the end of the tunnel….

…but it turns out to be a trains headlight !!!

projectsTodays U.K  GDP figures for July to September turned out to be grim news, with growth of 0.2% widely expected the actual figure was MINUS 0.4% !!! and now we are officially in the longest recession since records began.

So what can your company do to ensure survival:-

1) Review your costs on a regular basis – regular monitoring keeps everyone on their toes.

2) Introduce a regime whereby ALL purchase requisitions have to be approved by a Director. –  Its amazing how this can reduce unnecessary expenditure.

3) Get your costs scrutinized by an extenal body, its surprising what a fresh pair of eyes can see and the savings can far outweigh any consultancy fee.

4) If you are not already doing so consider outsourcing some of your key activities – but make sure you get professional outsourcing advice. The savings can be tremendous and preserve jobs in the long term.

5) If you need extra resource consider hiring interims or contractors, their contribution can have a massive impact for relatively litle cost.

Hopefully the Q4 data will be positive and we can all look forward to several years growth and prosperity.