Identification of substantial cost reduction potential by conducting virtual benchmarking for a leading engineering company
Our client was facing increasing competition from Asian market players.
In a recent tender the price level of our client’s offer was twice as a high as the one of an Asian competitor and 50% higher than that of the first European competitor. Thus, a short-term benchmarking project was set up to identify the main cost gaps with the competition’s products.
Arthur D. Little employed a holistic benchmarking approach following a strong value-engineering structure.
As our client was not able to acquire the competitor products for a real-life hardware comparison due to time and compliance restrictions, we developed a database with the relevant data (e.g., pictures, brochures, user manuals, main dimensions, technical specifications) for the benchmarking targets.
The project followed a three-phase structure:
- Collection of information for competitors’ products, assessment of clients’ previous internal projects
- Cost analysis of the client product, segmentation of components, analysis of customer requirements and norms, BOM analysis
- Analysis of competitor product design and solutions, including cost valuation, cost calculation based on a hypothetical client product, value engineering based on learnings from competitors
During the project, we implemented a systematic framework for interactive and interdisciplinary benchmarking to reveal cost and engineering potential, as well as to provide data for controversial discussions on technical solutions by introducing external facts.
We identified significant cost reduction potential not only for the focus product, but also for the whole product range. The benchmarking project resulted in full success through the identification of savings by changes of BOM, improved procurement, optimized assembly process and tailored system design.