Cost Reduction: Inventively Reducing the Cost of the Bill of Materials

COST REDUCTION:
INVENTIVELY REDUCING
THE COST OF THE BILL OF
MATERIALS
"A Crash Course on
Reducing Costs in Electronics
Products”
www.sig-hq.com
Property of The Strategy + Innovation Group

MANUFACTURING COST BREAKDOWN
10%
30%
60%
TYPICAL MANUFACTURING COST FOR
ELECTRONICS ASSEMBLIES
Labor Variable O.H. Materials
Source: David R. Dixon, PE, CPIM, Extreme Lean™: How to Keep Jobs in America, Society of Manufacturing Engineers, WESTEC 2004
Proceedings.
OBVIOUSLY THE REAL OPPORTUNITY IS IN LOWERING THE COST OF MATERIALS
FOR PRODUCING AN ELECTRONICS PRODUCT, NOT IN REDUCING THE COSTS
FOR LABOR (SOMETIMES THE REASONING FOR OUTSOURCING)
2

COMBINING VALUE ANALYSIS AND
INVENTIVE METHODS TO LOWERING
PRODUCT COSTS
USE VALUE ENGINEERING WITH FUNCTIONAL ANALYSIS TO
ANALYZE, UNDERSTAND AND FOCUS YOUR COST REDUCTION
EFFORTS:
 USE IT TO FIND FOCUS FOR KEY AREAS TO INNOVATE
 USE IT IN REVERSE, TO IDENTIFY SPECIFIC SOLUTIONS FOR UNDERLYING
PROBLEMS.
 IT IS PARTICULARLY WELL SUITED FOR PHYSICAL AND MECHANICAL
PROBLEMS, BUT CAN ALSO BE USED IN OTHER AREAS LIKE SEMICONDUCTOR
DESIGN, PACKAGING, AND PROCESSES WHERE PHYSICAL DESIGN AND
PROCESS WINDOWS CONFLICT – NOT COVERED IN THIS PRESENTATION
3

WHAT ARE THE BEST
METHODS FOR REDUCING
BOM / MATERIAL COSTS?
- IT DEPENDS ON WHO IS RESPONSIBLE FOR
LOWERING THE COST AND HOW THEY’RE GOING TO
REDUCE THOSE COSTS
4

THERE ARE NUMEROUS BOM COST REDUCTION
STRATEGIES (NOT IN ORDER OF EFFECTIVENESS):
1. Negotiate with suppliers and make commitments to buy larger
quantities over time in order to get better pricing without an initial
investment.
2. Group BOM components using one or both of the following criteria
 By type of component, (example: capacitors, microprocessor, inductors,
resistors, transistors etc…)
 By vendor / manufacturer - Start looking for common components. These can
be as simple as looking for 1uF value capacitors. Look for components with
an adjacent value. There might be an opportunity in the design to use a larger
or smaller component without impacting functionality – check with the
electrical engineer. Look for lower cost alternatives and ask for volume
discounts.
Typically Responsible People: Materials Program Manager, Commodity
Manager, or Materials Buyer
5

THERE ARE NUMEROUS BOM COST REDUCTION
STRATEGIES (NOT IN ORDER OF EFFECTIVENESS):
CONTINUED
3. Split your product into a core product with optional add-ons to reduce
the base-price for entry-level customers. This will many times increase
the number of SKU’s and/or require a complete product repositioning
4. Look for areas of your design where some parts are potentially
unnecessary. For example any non load-bearing parts may be trimmed
and glued in place rather than using screws or bolts. Fewer or smaller
parts may be used in some areas, etc…
5. Look for alternate materials and alternate parts that achieve the same
function without compromising the product design goals / functionality
STRATEGIES #4 AND #5 ARE WHAT WE’RE GOING TO FOCUS ON FOR
THIS PRESENTATION
Typically Responsible People: Marketing
Typically Responsible People: Product / Design Engineer and
Manufacturing Engineer
6

EXAMPLE: SERVER SYSTEM BOM COST
REDUCTION
INTEL DESIGNED SERVER
“SITKA- CABRILLO”:
SC450NX
SITKA MOTHERBOARD
SITKA MEMORY
BOARD
7

EXAMPLE: MEMORY BOARD FROM A SERVER
SYSTEM
8
SITKA MEMORY BOARD
 Analysis of the BOM showed that there were 3 each
THMT (Through Hole Mount) Holders – not shown -
to hold down all 13 Tall THMT Capacitors.
 When analyzing board circuit routing, it was found that
the THMT holders were constraining the available board
real estate for the routing – holes needed for the holder
to mount to the printed circuit board and secure the
capacitors in place
 Each of the THMT Holders cost ~$0.55/piece (expensive
for a piece of injection molded plastic right?)
 ~$20,000 NRE cost associated with any design change
to the mold for the injection molded parts (another
undesired cost adder)
 Supplier suggested solution didn’t fit board layout needs
and was too expensive an option to consider realistically
 Decision Point: the Engineers opted to redesign the Tall
THMT Holder instead

STEPS FOR REDESIGNING A TALL
CAPACITOR THMT HOLDER
1. What is the Ideal Final Result (IFR)?
2. What does the Functional Model look like?
3. What is preventing us from achieving the IFR?
 The list of problems, obstacles or challenges that are our problem
focus list
4. What are the contradictions?
 These contradictions or design conflicts can be resolved by using a
contradiction matrix that you can find in TRIZ (Theory of Inventive
Problem Solving)
5. What are the suggested potential solution paths?
9

STEPS FOR REDESIGN
1. What is the Ideal Final Result (IFR)? A capacitor THMT holder that does
not consume any board real estate and is low cost OR no THMT holder
2. What does the Functional Model look like?
 The list of problems, obstacles or challenges that are our problem focus
list
Problem Solving)
10

FUNCTIONAL MODEL
“AS IS”
THMT
Holder
THMT
Capacitors
PCB
(Printed Circuit
Board)
Holds
Holds
Holds
Consumes
Legend:
Necessary Function
Excessive Function
Harmful Function
Insufficient Function
11

FUNCTIONAL MODEL
“SHOULD BE”
THMT
Holder
THMT
Capacitors
PCB
(Printed Circuit
Board)
Holds
Holds
Holds
Legend:
Necessary Function
Excessive Function
Harmful Function
Consumes
12

STEPS FOR REDESIGN
2. What does the Functional Model look like? – see Functional Model
“Should Be” slide
 The list of problems, obstacles or challenges that are our problem focus
list
Problem Solving)
13

FUNCTIONAL MODEL
“SHOULD BE” = THE IDEAL FINAL RESULT
THMT
Holder
THMT
Capacitors
PCB
(Printed Circuit
Board)
Holds
Holds
Legend:
Necessary Function
Excessive Function
Harmful Function
14
IFR #1
THMT
Holder
THMT
Capacitors
PCB
(Printed Circuit
Board)
Holds
Holds
Holds
IFR #2
Note: There were two different ways of modeling
the Ideal Final Result, thus why you can model it
in either way we have them represented here

STEPS FOR REDESIGN
 We need to hold capacitors in place during the manufacturing process, shipping
and handling and must pass a shock and vibe test – either the THMT Holder
holds the capacitors, and the capacitors hold the THMT or not (IFR 1 or 2)hat
Problem Solving)
15

STEPS FOR REDESIGN
and handling and must pass a shock and vibe test – either the THMT Holder
Problem Solving) – we’re going to use software to speed up the process
16

DEFINING CONTRADICTIONS
Use the different definitions of each of the engineering system parameters of
performance of the system in question (see above for a software generated list of 50
different parameters) that are in conflict with one another. Focus your thinking on
what you want to improve that is working against or preventing/stopping you from
achieving your Ideal Final Result
Image Source: Software Matrix 2011 parameters from Systematic-Innovation.com 17

STEPS FOR REDESIGN
and handling and must pass a shock and vibe test - either the THMT Holder
Engineering Performance Parameters in conflict with one another:
 Strength versus Stress/Pressure, Reliability/Robustness, Manufacturability,
and Other Harmful Effects generated on the system
18

SUGGESTED INVENTIVE PRINCIPLES FOR SOLVING
THIS SAME TYPE OF PROBLEM IN ANOTHER INDUSTRY,
TECHNOLOGY OR SCIENCE
Instead of typical “blue sky”, random, trial and error brain-storming on how to solve
the problem (because now you’re focused on the underlying conflict in the design,
you also know with certainty that you’re solving the right problem). And because
you’re enabling the use of a very specific list of Inventive Principles that have solved
this same type of problem before that one has in their current design – gives what
we call “creative confidence” to the designer/engineer that they can solve the
problem at hand
Image Source: Software Matrix 2011 suggested inventive principles from Systematic-Innovation.com 19

SUGGESTED INVENTIVE PRINCIPLE:
#40 COMPOSITE MATERIALS
DEFINITIONS WITH EXAMPLES
A. Change from uniform to composite (multiple) materials where each material is optimized
to a particular functional requirement
- Aircraft structures where low weight and high strength are required. (With fibers aligned according
to loading - including multiple layers of fibers aligned in different directions.)
- Composite golf club shaft aligns structures to give low weight, high shaft-wise flexibility and high
torsional stiffness
- Concrete aggregate
- Glass-re-enforced plastic
- Fiber-re-enforced ceramics
- Hard/soft/hard multi-layer coatings to improve erosion, etc.. properties
- Non-stick coatings on cooking pans
Use the definition of the Inventive Principles and the examples to focus your mind’s
imagination on thinking how you could apply this Inventive Principle to solve your
problem
20

#35 PARAMETER CHANGES
A. Change an object's physical state (e.g. to a gas, liquid, or solid)
- Transition from mechanical to fluid or electrical drives
- Freeze the liquid centers of filled candies, then dip in melted chocolate, instead of handling the messy, gooey, hot liquid
- Transport oxygen or nitrogen or petroleum gas as a liquid, instead of a gas, to reduce volume
- Dry ice - Ice cubes - Jelly
B. Change concentration or consistency
- Liquid versus bar or powder detergents - Concentrated or de-hydrated orange juice makes transportation easier
- Abradable linings used in seal design
C. Change the degree of flexibility
- Use adjustable dampers to reduce the noise of parts falling into a container by restricting the motion of the walls of the
container
- Vulcanize rubber to change its flexibility and durability - Compliant brush seals rather than labyrinth or other fixed
geometry seals
D. Change the temperature
- Raise the temperature above the Curie point to change a ferromagnetic substance to a paramagnetic substance.
- Cooking/baking/etc - Lower the temperature of medical specimens to preserve them for later analysis
E. Change the pressure
- Pressure cooker cooks more quickly and without losing flavors - Electron beam welding in a vacuum - Vacuum packing
of perishable goods
F. Change other parameters
- Shape memory alloys/polymers - Use Curie point to alter magnetic properties - Thixotropic paints - Rheopexic fluids
21

#5 – MERGING
A. Physically join or merge identical or related objects, operations or functions
- Automatic rifle/machine gun
- Multi-colour ink cartridges
- Multi-blade razors
- Bi-focal lens spectacles
- Double/triple glazing
- Strips of staples
- Catamaran/trimaran
B. Join or merge objects, operations or functions so that they act together in time
- Combine harvester
- Manufacture cells
- Grass collector on a lawn-mower
- Mixer taps
Sometimes you don’t get ideas right away, (stress is not good for creative thought),
but by doing something else rather mundane after you’ve done the focused
brainstorming, like showering, doing the dishes, driving to work/home, gardening,
etc… enables the mind to free up and the conceptual dots connect and then the
ideas just seem to come to you since you’ve already seeded the mind with
Inventive Principles
22

#17 – ANOTHER DIMENSION
A. If an object contains or moves in a straight line, consider use of dimensions or movement outside the line
- Serrated or scalloped edges on a knife blade or hole punch - Application of fade or draw to the affect the trajectory of a
golf ball
- Paper edges clipped or made bigger in order to facilitate ease of location of entries in an address book, or for file dividers
- Curved bristles on a brush - Coiled telephone cable
B. If an object contains or moves in a plane, consider use of dimensions or movement outside the current plane
- Pizza-box with ribbed (as opposed to flat) base - Spiral staircase uses less floor area
- Introduction of down and up slopes between stations on railway reduces train acceleration and deceleration power
requirements
- Black keys higher than white keys on a piano to facilitate ease of location when playing
- Conical instead of plain flange joint - Paper clip works by being deflected out of plane
C. Use a stacking arrangement of objects instead of a single level arrangement
- Cassette with 6 CD's to increase music time and variety - Electronic chips on both sides of a printed circuit board
- Multi-storey office blocks or car-parks
D. Re-orient the object or system, lay it on its side
- Heels on a shoe alter height and leg-shape of wearer - Hang a mirror with corners (rather than edges) top and bottom to
cater for greater variety of user heights - Take a door off its hinges to plane top and bottom surfaces to size
E. Use 'another side' of a given object or system
- Press a groove onto both sides of a record - Mount computer chip components on both sides of a silicon card
- Print text around the rim of a coin
- Fix a leaking car radiator or pipe by adding fluid sealant to the inside rather than trying to seal from outside
23

#25 – SELF SERVICE
A. Enable an object or system to perform functions or organize itself
- A soda fountain pump that runs on the pressure of the carbon dioxide that is used to "fizz" the drinks.
This assures that drinks will not be flat, and eliminates the need for sensors
- Halogen lamps regenerate the filament during use--evaporated material is re-deposited
- Self-locking nut
- Self-cleaning oven
- Self-balancing wheel
B. Make use of waste resources, energy, or substances
- Use heat from a process to generate electricity "Co-generation"
- Use animal waste as fertilizer
- Use food and lawn waste to create compost
Of course not all suggested principles necessarily will fit your specific problem, just
look at as many of the most likely relevant Inventive Principles to get you going down
the best solution path. Please note because the Inventive Principles were derived
from only the most innovative of patents and the laws of physics, you’ve got some of
the most inventive minds actually working with you to help generate a solution to
your problem/design conflict
24

#4 – ASYMMETRY
A. Where an object or system is symmetrical or contains lines of symmetry, introduce asymmetries
- Introduce a geometric feature which prevents incorrect usage/assembly of a component (e.g. earth pin on electric
plug)
- Asymmetrical funnel allows higher flow-rate than normal funnel
- Put a flat spot on a cylindrical shaft to attach a locking feature
- Oval and complex shaped O-rings - Coated glass or paper
- Introduction of angled or scarfed geometry features on component edges
- Cutaway on a guitar improves access to high notes
- Spout of a jug - Engine Cam - Ratchet
- Airfoil - asymmetry generates lift - Eccentric drive - Keys
B. Change the shape of an object or system to suit external asymmetries (e.g. ergonomic features)
- Human-shaped seating, etc
- Take account of differences between left and right handed users
- Finger and thumb grip features on objects
- Spectacles
- Car steering system compensates for camber in road
- Wing design compensated for asymmetric flow produced by propeller
C. If an object or system is already asymmetrical, increase the degree of asymmetry
- Use of variable control surfaces to alter lift properties of an aircraft wing
- Special connectors with complex shape/pin configurations to ensure correct assembly
- Introduction of several different measurement scales on a ruler
25

#6 – UNIVERSALITY
A. Make an object or system able to perform multiple functions, eliminating the need for
other systems
- Child's car safety seat converts to a stroller
- Home entertainment center
- Grill in a microwave oven
- Radio-alarm clock
- Swiss Army knife
- Work-mate
- Universal joint
- Electrically conducting clothing enables many new functions to be delivered
- Use of Standards in e.g. data exchange
- Cleaning strip at beginning of a cassette tape cleans tape heads
It’s important for you to know (based on research in the field), that by
combining more of the Inventive Principles together (2-3) you usually get a
stronger / better solution. The point is to get your creative juices flowing, to out-
think/out-create the problem – this is engineering excellence and is actually the
funnest part of engineering and design
26

STEPS FOR REDESIGN
and handling and must pass a shock and vibe test - either the THMT Holder
Engineering Performance Parameters in conflict with one another:
 Strength versus Stress/Pressure, Reliability /Robustness, Manufacturability,
and Other Harmful Effects generated on the system
 Principles: #40 – Composite Materials, #17 – Another Dimension, #4 –
Asymmetry, #5 – Merging, #25 – Self Service and #6 - Universality
27

EXAMPLE: REDESIGNED THMT HOLDER ON A
MEMORY BOARD LOWEST TOTAL COST SOLUTION THAT
 Saved valuable board real estate
 Each Lexan tape solution: ~$0.11/piece
 Total BOM cost reduction/board: $1.32/bd
 Total BOM cost reduction across platform by
volume (assume 50,000 units/ year): $66,000.00
 No NRE costs – saved $20,000.00
 Total Cost Benefit: $86,000.00 in the 1st year
 A patentable solution – which cannot be
overstated in it’s value to you/your company,
because you can now go out to other
companies or vendors and license the
intellectual property (IP). With this knowledge
even a small company can make revenue from
IP royalties, a good IP lawyer helps too!
28
Additional Important Notes:
• This was a relatively low volume
product, the higher the volume a
product is the higher the cost
benefit
• When this approach is used on high
cost components the benefits are
higher too.

REDESIGN COSTS ARE THE LOWEST
VALUE: “WHAT IS THE COST OF NOT DESIGNING OUT THE HIGHER COSTS OF A BOM?”
 Using an Inventive approach to Redesign saves significant time in the process of redesigning
as well as significant cost savings for you/your company, and can even generate revenue in
unforeseen ways
COST TO REDESIGN: TRAINER, TRAINING TIME AND SOME SOFTWARE
 Time of 2-3 engineers (minimum #) who are trained in the correct use of Inventive Methods
 Cost of an experienced Engineer-Instructor suggested to teach TRIZ – having learned
initially on my own, and then getting experienced instructors provided better
engineering/design outcomes
 There are many Systematic Innovation or TRIZ instructors out there, go find the best one to train your
engineers/problem solvers for you/your organization – not all are created equal; some will try and train
your team on everything in the tool box, or not show you enough to be successful
 Low cost Systematic Innovation software (Less than $1000.00 USD), we recommend
www.systematic-innovation.com’s software
APPROACH: TRAINING INCLUDES REAL PROBLEM SOLVING AND MULTI-DISCIPLINARY
 Important to have the right staff who can do the work - Typically a multi-disciplinary
approach of engineers working together can do this from design and the manufacturing
domains
29

FINAL COMMENTS / NOTES
There are additional tools in the TRIZ (Theory of Inventive Problem Solving) body
of knowledge. We’ve just covered a few of the tools to give you a bit of a taste of
how to see the value for yourself with the example of applying some of the
methods in a Materials / BOM cost reduction effort.
If you’d like to know more about how to Redesign Inventively or just how to use
Inventive Methods, or Systematic Innovation / TRIZ to solve tough or complex
product or process problems in manufacturing or design, just let us know.
As for myself; I’ve been using and training the methods for 17 years, successfully
training >900 engineers, scientists and program/project managers, as measured
by $300M in savings and benefits – you can find me or the rest of the team on
LinkedIn at the Strategy + Innovation Group or you can contact me directly via
LinkedIn.
Best of luck in your “Driving Innovative Solutions that Work”
-Richard Platt
SENIOR MANAGING PARTNER
30

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