Case Studies: > Reduce cost of fabricated electronics cabinet > Identify better supply chain methods. Fabricated Electronics Cabinet [ back to top ] Brief: Reduce cost of fabricated electronics cabinet and base frame & housing Size: Electronics cabinet 2metres high x 1 metre square. Base frame and housing 3 metres long x 1 metre wide x 2 metres high Approach: Was the brief at face value the most economical route? In short no! There was more potential to reduce cost by increasing the added value a vendor could bring to the project. Result: The project now required a vendor who could not only produce metal fabrication but also levels of electronics assemblies. The vendor would also need experience in either making or sourcing cable harnesses and would also need to to be able source all electronic and mechanical parts required in a final assembly. A number of vendors were selected and after an in depth review of their capabilities and commercial offers the final decision led to an agreement which in unit costs alone reduced the electronics cabinet from £12.5k down to £7.5k and the frame and housing from £4.25k down to £2.75k. This gave a saving of £650k in the first year. This did not include any potential savings using value engineering processes which are due to commence after the initial batches. The other cost savings achieved were in overheads based on reduced Purchase orders, Inventory held, Stores and Manufacturing space, less Vendors used. Reduced accounts transactions will lead to a reduction in accounting costs. Company Profile: Manufacturer of Capital Equipment. Employing originally 140. Turnover circa £7million. Supply Chain Methods [ back to top ] Brief: To identify better supply chain methods for raw material and reduce range of materials used and identify other cost benefits. Process: Kaizan methods were used initially in order to ensure that all potential areas of improvement would be identified. Internal Improvements: Reduction in range of materials used to 160 from 200 plus. Reduction in amount of materials held £185K to £75K initially. Reduction in stores space required from 6k sq.ft to <2k sq.ft. Reduction in materials control activity. Administration: >900 purchase orders NOT to be raised each year and 4800 less Goods Received notes. Implementation of consolidated invoicing along with a decrease in the number of invoices received by >1100. Head count reduction of 2.5 heads. Total labour and administration savings >£44k/year. On top of this the reduced space required saw a saving of >£32K/year. Cost savings on material reduction was assessed at >£10K/year which included a figure for the final inventory level stabilising at < £35k/year. Finally, the actual reduction in spend on material prices due to single sourcing reduced from £475k/year to circa £380k/year (20%). Future savings: One of the reasons in choosing the vendor was their ability to offer technical help in the materials they dealt in. They are able to offer advice on all areas of its application and machining which will result in further cost benefits in using materials fit for purpose and reductions in machining times. Their systems will also analyse material sizes and volumes used. They will then investigate the possibility of further economies in using stock sizes, with the intention to reduce “specials”. Resulting in the increase in volume of lower cost materials and by definition higher volume of a particular size will reduce its price. Total cost saving in first year is £181k . This is a substantial saving in anyone's book.