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Lower Unit Cost Success Story

Despite successful continuous improvement programs resulting in reduced manufacturing-related product costs, this global leader of high-volume medical devices was not satisfied. They needed capacity increase and were looking for a "step-change" in cost reduction.

graph showing 3 concepts and reporting the total cost of ownership results 

Challenge

The company advised us of the stretch targets associated with their step change challenge.  Although they already had several similar lines, they were not interested in achieving the desired capacity expansion through a typical duplication strategy.  ATS was asked to meet the following key performance indicators (KPI) in preparing future equipment proposals:

  • increase the line throughput by 50%
  • reduce floor space by 50%
  • operate the line with half the operators
  • capital acquisition cost reduced by 50%

Changes to the product design were not to be considered.

Approach

We contacted the customer to better understand the reasons for such specific KPI targets. Having pioneered a total cost of ownership (TCO) tool, our consultants understood that there are many factors influencing the cost of goods manufactured—not just labor, space and capital efficiency. Once the true project constraints were established, it was agreed that the TCO analysis would be used to compare multiple proposals by quantifying the projected product cost for each.

We prepared the baseline cost analysis. As with many fully automated manufacturing processes, the largest contributor to the costs of goods was materials, in this case the moulded components. Studying the overall usage and net yield of each component uncovered a reject mode late in the assembly process. Eliminating this defect, at the point of highest added value, would be beneficial to both cost and output.  ATS Engineers examined the final assembly station design, the tolerances of sub-assemblies and finished product test methods.   

We prepared multiple proposals for the future line examining the order of assembly operations, combining work stations, and rebalancing the line flow. Where applicable, hardware and technology upgrades were proposed. Options for minimum floor space and minimum labour concepts were created. For all proposals, we performed a review to minimize the impact of infrastructure, utilities and consumables.   

Result

We were able to present the customer with three proposals for the next higher-output assembly line.  Although not fully achieving the key performance indicators, we were able to foresee significant improvements in labor, space and capital efficiency. More importantly, each option projected a product cost lower than the customer’s expectations.  We also identified the recommended proof-of-principle (POP) studies to demonstrate higher production yields.