Case Study: Improving the Throughput of Automotive Cost Reduction Ideas
Our client, a global automotive OEM, is one of the largest producers of passenger vehicles globally. They were struggling with inefficiencies with cost reduction causing low engineering output and cost saving ideas were not being implemented as early as possible, impacting margins.
In recent years, the client has seen volumes and profit falling within the European market to a level where their regional presence and operations were barely sustainable.
In response to this, the client launched several initiatives across all business areas to address a wide variety of challenges and issues. The client engaged MI-GSO | PCUBED to identify and address issues within cost reduction processes across multiple commodities within Research & Development, which included areas such as vehicle body, chassis, electrical, and trim.
Read also our automotive industry article: Driving Performance with Automotive Project Management Services
Using Lean techniques, MI-GSO | PCUBED began by mapping the client’s end to end process and how the engineering teams interacted to help define the key issues. Our techniques were based on Kaizen’s five principles:
- Create customer value
- Reduce waste
- Empowering teams
- Increase transparency
- Embed within teams to see value
Across the different process points, we measured:
- Whether engineers were being used as technical experts.
- If they were working collaboratively.
- Whether activities were integrated.
- If actions were transactional.
We ran multiple workshops to identify the as-is process, identify issues, and break points that needed to be rectified. We also conducted analysis based on historic data to understand where the delivery issues lay in the processes.
We found that engineers were spending a significant amount of time on project management activities, transactional reporting, and analysis. This contributed heavily to a drop in engineering output as the engineers did not have sufficient time to carry out both activities.
Additionally, we found problems regarding governance, data quality, and delivery of project management activities. Engineers did not have the right capability or interest in project management activities and lacked process clarity. This further contributed to a slower moving process where mistakes and omissions had to be frequently corrected.
The throughput of cost reduction ideas was low due to bottlenecks in the process where engineering teams lacked ownership and accountability for managing the process. There were significant issues with prioritisation as high value ideas were rarely given the highest level of focus.
From our 25+ years of working in the automotive sector with multiple major OEMs, we regularly see these issues which affect numerous business areas, including cost reduction.
Typical interventions focus on improving areas such as technical benchmarking. However, steps can be made by improving the management of the process itself rather than focusing on smaller elements of it on a piecemeal basis.
From our initial analysis, we collaboratively developed a way forwards with the client to improve their visibility of process status and avoid any losses caused by the late implementation of opportunities.
The immediate challenge was that many cost reduction ideas were stagnating within the as-is process. MI-GSO | PCUBED piloted an integrated Project Support Team within one commodity. We took ownership of project management activities to drive the process as it initially existed, allowing the engineers to focus on engineering.
Working with the client, we re-drew the boundaries between the engineers’ role and our Project Support Team role. The engineers were tasked with generating new ideas, and we were responsible for driving the throughput of ideas to implementation. By taking ownership of the processes, we were able to identify where the real issues were. Working collaboratively with the client teams, we improved the as-is process and streamlined activities.
Now that we had things moving again, the next focus area was to develop a simplified way to prioritise ideas and to visualise cost reduction status. Originally, the client manually transferred their data on a weekly basis. Using Tableau, we built a digital dashboard solution using data from the bespoke client cost management systems.
The digital dashboard gave us better access to the data. We had a clearer view of each idea’s merits and drawbacks, enabling us to prioritise the ideas that needed to be progressed first. We then built a clearer understanding of which ideas needed to be discontinued, as the level of effort and value delivered back to the client were not always worth pursuing.
Read also our case study: Increasing Time to Engineer by Simplifying Data and Decisions with Microsoft Power Platform
After a successful pilot within the first commodity, we developed a blueprint for scaling our activities across the other commodities facing similar problems.
While delivery was carried out using traditional ways of working, we took an Agile approach to deploy our team across different commodities. We rolled this out incrementally to ensure that we had the flexibility to reprioritise our capacity should needs change. We leveraged lessons learned as we progressed to help accelerate the delivery rollout and to ensure minimal disruption to business as usual.
This approach allowed us to accelerate the ramp up significantly and deliver value faster as we embedded within each new design commodity.
Once we scaled across all functions, through ongoing productivity gains and increased levels of efficiency, we were able to drive operational delivery and optimisation actions with a smaller team than initially forecast.
Our activities delivered significant benefits back to the client. We demonstrated significant cost reduction with ideas being implemented earlier due to the team’s increases in efficiency and efficacy.
When analysing Return on Investment (ROI), the cumulative benefits vastly outweighed the costs. Working at full maturity across all commodities, the team were delivering an ROI of more than 400%.
This ROI is comprised of several different factors, such as:
@ MI-GSO | PCUBED UK