Design for Margin is all about dialogue

Design for Excellence (DfX) is a complicated concept that does not sell itself just like that. Which X’s are the most important? Who is responsible for what? If you do it right, the machine will be a lot better and will also cost a lot less. A chat with two DfX specialists at NTS, who are not afraid to ask customers difficult questions. 

These days, there are a lot of requirements that machine developers have to take into consideration. Design for Manufacturability, Design for Cost, Design for Logistics, Design for Cleanliness, Design for Maintenance, etcetera, etcetera, etcetera. It is a great challenge for many companies to find the best solution with all these potentially conflicting requirements. ‘DfX goes beyond manufacturability,’ said Patrick Strating (left on photo), Engineering Manager at NTS Norma. ‘The focus lies on the total cost of ownership. You want the whole process, from development and production to the operation of the machine, to cost as little as possible.’ 

‘There really is only one goal: Design for Margin,’ added Johan Veldhuis (right on photot). He is Operations Manager at NTS Systems Development in Wijchen and is responsible for producing the prototypes invented by his colleagues in Eindhoven or by the customers. Veldhuis gave an example of an X which his customers do not immediately think of: design for China. ‘If you eventually want to have the systems manufactured in China, you have to think differently. In China, the material costs are dominant in the cost price. For a machine that is produced in China, it is, therefore, important to produce as little material waste as possible. In the Netherlands, labor costs are the dominant factor and you optimize the process to minimize the working hours. These two issues can contradict each other, so you have to take clever decisions depending on where you want to manufacture.' 

The availability of materials is also a factor. In the Netherlands, you only have to make a phone call and the materials will be delivered the next day. ‘That is not the case in China or even the Czech Republic,’ said Veldhuis. ‘More than that, some materials are more expensive there than they are in the Netherlands. We discuss this in advance with our customers. Where do you want us to produce the machine? Here, in China or in every continent you deliver to? The answer to this question affects the design.’ 

NTS’s customers often are head-and-tail companies, which want to focus their attention on the end systems and the marketing. ‘Many of our customers no longer employ people with the required production knowledge to design systems, let alone, to design a system focusing on manufacturability, measurability or logistics etcetera,’ explained Veldhuis. ‘NTS fulfils this need. Give us your requirements or even better, give us your business model! It is then up to us to make sure the system meets all technical, logistical and other specifications and is ready to be delivered to the end customer.’ 

What does a customer want to pay for the services offered by NTS? ‘Being responsible for the entire life cycle of a system, including changes, obsolescence, etcetera, comes, of course, at a price,’ said Veldhuis. ‘You have to have engineers stand-by and design alterations can be expensive, especially if you take design verifications into account. Initially customers often do not want to pay for such life-cycle costs, but normally such costs are not included in our product prices. We talk to a lot of customers about this. What do you want? DfX only until initial Release for Production? Or for a product’s entire life cycle? Which regions are important? Is the cost price or the time-to-market the most important factor?’ 

‘Of course, everybody wants short lead times, because nobody wants to have too much stock,’ explained Veldhuis further. ‘They want to order one system and have it ready within two weeks (including the manufacturing of parts and bring in buying parts.). But single piece production is a different challenge compared to optimizing a standard serial production process. In the latter case, you want to run large batches. And maybe produce all the parts for the entire life of the system in one batch. You must then accept the risk that you may have to scrap parts, because the design has changed.’ 

Veldhuis recently spoke to an English customer. ‘The purchaser asked what makes us different. I said that we were agile and told him that we can quickly produce small series. He thought that was interesting, but did not want it to cost extra. His colleague however was also very interested and wanted to know more about us. He saw that being agile means that you have less stock, can react more quickly, can scale up more easily and that design changes are easier, quicker and cheaper to implement. That is added value.’ 

‘What is the value of reducing the installation costs? It costs a lot of money to disassemble a system here and to assemble it again in, for example, Argentina. Every hour that you save “in the field” is money earned,’ said Veldhuis. ‘We have a nice example, that a frame was designed € 1,000 more expensive in order to save € 4,000 on installation costs, because it made installation much simpler.’ Such a consideration seems like a no-brainer, but experience has shown that it is not so easy to convince customers of this. Veldhuis: ‘Within an organization, a person who is responsible for the mechanics might have to pay extra for “his” Cost of Goods.. Another person who is responsible for installation will reap the benefits. We try to get these people to communicate with each other in order to realize the lowest integral costs. That is also DfX.’ 

‘DfX involves many different issues,’ said Strating. ‘It is not easy to get all the knowledge around the table at the same time. One engineer comes up with the idea, but the idea involves so many disciplines that it simply does not fit into one person’s head. Even if there are two people involved, you can predict in advance that you could do better. You can have five people thinking about a problem, but if a sixth person already knows the answer, it is best to ask that person.’ ‘The risk is that development teams become too large, because you do not want to miss out on any knowledge,’ warned Strating. ‘The trick is to bring all the knowledge together in the project team in the most agile way possible. You want to have exactly the right number of people.’ 

‘René Vlaskamp is the expert at NTS Norma for the manufacture of metal components. He covers many disciplines by himself, but has very little knowledge of logistics,’ said Strating. ‘What matters is that you know where to find that knowledge in the organization. Engineers must be able to realize themselves when they need a specialist. They have to develop that instinct.' As a company, NTS gives explicit attention to that growth process. ‘We invest in structuring processes, methods and instruments for both the redesign of an existing machine and the development project from scratch,’ said Strating. He also explained how NTS deals with the multitude of dimensions involved in the optimization process. ‘You can create a bill of materials for a system. If you then sort this list by price, you can take a closer look at the five most expensive items. You can also break the device down differently; for example, by function. You can assign a value to these various functions and then draw up a list of priorities. Surprisingly, you often end up with different components than the previous method. You can also sort by, for example, serviceability or ease of assembly. At some point, you will have done it enough times to be certain that the largest savings have been found.’ 

Strating admitted that, at the start, the NTS engineers were skeptical of this approach. ‘Now, however, they have seen a couple of times that making different lists leads to different answers. That has made them more nuanced and more attentive. Where they previously paid a lot of attention to functionality, they now see that, maybe, something could be done about the price and they get help. I have seen that happening much more often in the last few years.’ 

Difficult questions 
If a customer turns to NTS to reduce a system's production costs, it can never be the intention that NTS simply reduces its margin. ‘When asked to reduce a system's production costs, we take another good look at the specifications,’ explained Veldhuis. He then gave an example. ‘There may be a requirement from the standpoint of design for servicing that it must be possible to replace certain modules within 30 minutes. If practice has shown that such modules only break down once every ten years, the replacement time can be easily increased to 10 hours. This might mean that the frame and the cabinet can be a lot less complex and, as a result, significantly cheaper.’ 

Veldhuis explained that NTS regularly makes proposals for cost price reductions that customers do not accept. ‘Because they feel there is a too high risk that the altered design will no longer meet all requirements,’ he sighed, only to hastily add that he understands the customer’s reluctance. ‘Alterations are always extremely difficult. The people who once decided that something must be done in a certain way are often long gone to a different project or have even left the company. If we then ask if things can be done differently, it is difficult for the company to give a good answer. It than can be difficult to guarantee that the functionality remains the same; requires knowledge of the domain, which only the customer has.’ 

That is why it is important to include DfX in the development process, and to continuously monitor the cost price. ‘A lot of people immediately think of the people who know everything about milling, machining or sheet metal,’ said Veldhuis. ‘However, it is the system architects, who assess a system’s functionality from an all-encompassing level, who can make the biggest savings. We also do that for build-to-print projects. Even if the customer says the design is ready, we are stubborn enough to still take a good look at it. Leave it to an architect to ask the difficult questions. What about the natural frequency? Why have you chosen solid, milled steel instead of a sandwich construction of 2 mm sheet metal that does not require any machining? If you look at the design with a fresh pair of eyes, interesting proposals always come to the surface.’ 

NTS tries to embed this culture in its own organization. ‘It is never nice for people to receive criticism, but NTS wants a culture to develop in which it is accepted and appreciated. It becomes delicate when it involves customers. If you are not critical at the beginning, you might end up in trouble and high cost at the end of the project. If you ask difficult questions, you may well end up not getting the job. That is what the commercial game is all about.’ 

Perfect example of Design for Manufacturing within NTS. One of the FEM engineers, who also detailed and improved the design of a welded sheetmetal frame, is supporting his colleagues in manufacturing the first prototype.

Not begrudging 
Strating believes that DfX is essentially about entering into dialogue with the customer. ‘What does the customer want? What helps him the most? You have to react to that. Which X is the most important? The customer often does not even know that himself. It has to be cheaper, but it should definitely not cost him more. In other words, NTS must give up some of its margin. That means, we would have to squeeze our suppliers. Nobody ends up making a profit and companies go bust. That is not the sort of relationship you want. Therefore, if a customer wants to spend less money and we want to keep our margin, we have to revise the design.’ 

DfX is difficult to sell, but Strating sees that most customers eventually understand it. ‘Sometimes, however, they are not open to questions about market expectations, margins or the importance of serviceability. Of course, the margin is always a sensitive issue - and we understand that - but if you know what something is allowed to cost, you have an excellent guideline for optimizing your design. We call that cost as an independent variable. It is not only functionality that matters, it is also an absolute given that a product must have a certain price in the market. The result is that you may have to lower your functionality demands.’ 

‘So, if the system has to be less expensive, we look for a solution together. We come up with all sorts of ideas, but the customer ultimately has to contribute. They have to receive a product for a good price and we must be able to make a good margin. You should not begrudge each other that profit, because neither of us benefits if the other one goes bankrupt.’ NTS has the difficult task of convincing its customers one by one of the advantages of such a relationship. ‘Of course, it takes time to build a relationship of trust, but we are becoming increasingly successful in achieving it. And once you have such a relationship, you make better choices.’