Saving Millions on Reuse

Say a manufacturer introduces 10,000 parts per year at approximately $5k per part. Even a 2% improvement in part reuse could net the manufacturer millions of dollars in savings! So, why aren’t more manufacturers focused on organizing and classifying their parts to achieve better reuse? How do you calculate the real costs of introducing a new part and maintaining it over the life of a product? And what is the best way to avoid part duplication?

The Lifetime of a Part Across the Value Chain

The lifetime value of a part should take into consideration far more than just the cost of its initial creation. The example below outlines the various teams that are often involved in a part lifecycle as it progresses from project to production and aftermarket phases.

 

Product Maintenance
Quality investigations, designing, dimensioning, test, PDM administration etc.

 

 

 

 

Suppliers
Procurements & visits

Process and quality assurance at the supplier
Annual cost negotiations

 

 

 

Material Handling
Set up, forecasting & ordering
Quality assurance Administration

Internal material handling
logistics, storage, packaging, kittling preparations
Assembly flow
Sequencing, material control

 

 

 

Create a project around parts governance that eliminates products that are unnecessarily complex. Parts classification helps engineers select the right parts, from preferred vendors, before it is too late to say no! The costs associated with poor part reuse, scrap, and high inventory are reason alone to tackle a classification. Manufacturers who classify and reuse existing parts see huge benefits including:

When calculating the benefits of part reuse a variety of factors need to be taken into consideration, including the part type, project phase, and the part duration per project phase.

In the example below, the manufacturer could expect to avoid introducing approximately 160 new parts per year ((10,000 new parts per year x 2% redundant parts) x 80% probability of redundancy avoidance). By multiplying 160 redundant parts per year by the overall NPV (net present value) for a new part ($15,000), this manufacturer would save approximately $2.4M per year on parts reuse. To understand the lifetime impact of the parts reused in ‘Year One’, we can multiply the total lifetime duration of those reused parts by the lifetime value of the parts to estimate a total savings of $55M across 23 years. Net present value can be calculated using the organization’s internal interest rate.

We can see the benefits of parts reuse are obvious from a cost standpoint alone. So, how does a manufacturer go about doing it? Let’s start by understanding what it means to classify parts. Parts classification is the process of organizing products, parts, and documents for easy retrieval and waste prevention. By standardizing and classifying products, organizations promote information and parts reuse throughout the engineering process.

Parts classification can be achieved in two common ways leveraging product lifecycle management (PLM) software:

1. Parts Classification
Creating an initial description to classify parts and allow for additional attributes to be added to the description, making it easier to break down parts by category.

Example: A Bolt
This would first be categorized as hardware with a description classifying it as a “HEX HEAD, HEAVY.” It can be further classified with more descriptive attributes like length, finish, and thread pitch.

2. Supplier Management
When there are many parts from different suppliers, supplier management helps organizations know which parts can be sourced from each supplier when defining a product.

Example: A Bolt
If a bolt is available from different supplier companies, managers need PLM to provide relationship identification between parts and suppliers with region, availability, cost, or compliance information.

Core functionality that will help manufacturers to ensure a swift and seamless engagement include:

• Automatic part and document naming based on attributes
• Localized parts information
• Configurable classification scheme tailored to business needs
• Simplified assignment or classification of new parts and documents
• Multiple ways to search and refine searches

Seagate had over 30 million records to migrate, several design centers, several internal & external suppliers, as well as contract manufacturers and original design manufacturers. By implementing parts classification with Windchill, Seagate created two classes: one for parts and another for tooling. This was made possible by a cross functional team that accounted for all users in the value chain. Seagate moved and classified over 1 million parts into the Windchill environment allowing users to search and browse for parts in a fast and efficient way. They were able to create a record for part numbers and suppliers for future referencing enabling greater efficiency and collaboration in the overall value chain.

For more ideas on how to classify and better manage your parts, visit Parts Classification and Duplicate Parts Avoidance | PTC.