As used here, the purpose of value engineering is to reduce the cost of a product without affecting either its functionality or its value to the end customer. Of particular import are so-called locked-in costs, which are those that result in the continuing use of resources as the result of past decisions. The process of value engineering is directed to matters of design, materials, and assembly.
Properly and consistently executed, value engineering almost always reduces product cost, often by as much as 20 per cent or more the first time through, and then by another two per cent to six per cent every year thereafter.
Traditionally, multinationals and other upper market companies – most with dispersed networks of dedicated value engineering teams — have been the principal beneficiaries of value engineering. This considerable and continuing investment has helped the global economy achieve regular productivity gains, which typically run somewhat over three per cent annually.
Thus middle market companies must regularly achieve similar gains just to keep up, and they must do even better to get ahead. Yet, given their modest scale and scope, the harsh reality is that most middle market companies aren’t executing a disciplined process of value engineering. Design engineers are overwhelmed with new products, thus having no time to mine the gold embedded in the core products that account for most of their company’s sales. And manufacturing and materials personnel are consumed by building products as they are, never mind worrying about contributing to making them what they could be.
That’s why AMI offers the EMS middle market a full complement of expert value engineering services. At AMI, with most of its customers competing in ferocious, highly commoditized markets where annual price reductions are the norm, value engineering is a core routine of its everyday business.
AMI’s value engineering engagements, which can be product, project, or subscription based, are governed by an engagement team comprised of manufacturing engineers and sourcing professionals. For most such engagements the team first prepares and defines benchmark costs for assembly and materials. For assembly this involves preparation of complete manufacturing process packages, and for materials it involves preparation of costed BOMs, which are based on the customer’s AVL, associated EAUs, and materials prices provided by AMI’s suppliers.
These benchmark costs are then analyzed against customer standards, which is a process that assures mutual understanding and — usually the case — reveals low hanging fruit.
Following this are repetitive processes of brainstorming, analysis, and trial, error, and success. These latter steps often involve samples of new materials, and the development and rigorous testing of prototype assemblies. The process concludes with a report that includes recommendations, new costing detail, and associated documentation.
AMI’s value engineering services are included as applicable within its manufacturing and materials services programs. As a stand alone offering, AMI’s value engineering service can be priced on the basis of either results or a fee for professional services.
AMI, with its proven and expert capability in value engineering, is the right size and the best choice for the EMS middle market.