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Cost Engineering

Cost & CO₂ Engineering: Identifying Cost Potentials, Utilizing Them Quickly and Consistently!

How can offers be created accurately and in record time so that we can compete successfully in high-cost locations like Central Europe?

This is the focus of the Cost Engineers at Tset. Through workshops and professional events, including the renowned Vienna Motor Symposium, they consistently demonstrate how to improve offer processes and positively influence negotiations through enhanced background knowledge. The topic is "Value Analysis and Value Engineering." The automotive industry is a significant application field here, though the solution is very much transferable to other sectors as well.

Cost Engineers Face 3 Challenges:

1. Understanding

Understanding the composition of costs and knowing the levers: this enables rapid and competitive offer submissions, and helps avoid overly conservative offers or those that fall below the profitability threshold.

2. Preparation

Proper preparation for negotiations: this requires detailed knowledge of the individual cost drivers (rather than relying solely on assumptions or past experiences).

3. Cost & CO₂

Considering the relationship between costs and the CO₂ footprint:  this topic is rapidly gaining importance due to various EU regulatory measures, and can indeed present a strategic opportunity.

What is needed is the transformation from conventional cost engineering to development-accompanying cost & carbon engineering, which considers dynamic factors such as wages, materials, energy, and CO₂. But how do you move from the previously reactive cost engineering to a proactive, comprehensive, and sustainable profitability management system? This will be the main focus going forward.

One Thing Is Clear:

EU regulations will increase margin pressure on non-EU goods due to additional CO₂ pricing. CO₂ emissions are evolving from a compliance issue to a more strategic one – and a business case. This occurs in several stages through the implementation of CBAM (Carbon Border Adjustment Mechanism) for products imported into the EU, and through the general introduction of CO₂ pricing from 2026. Irrespective of whether production occurs inside or outside the EU – the measurement and management of CO₂ emissions in the supply chain affects everyone (whether it’s an OEM, or a Tier 1 producer in the automotive industry, or other sectors). Due to the increasing complexity that arises from CBAM, cost calculations and CO₂ emissions will need to be mapped in the same IT system in the future. Tset already offers a solution to master this challenge.

Cost Engineering in Product Lifecycle Phases

A timeline diagram showing various activities across different phases of product development. The phases include Feasibility/Concept, Series Development, Series Preparation, and Production Phase. Activities listed include Understanding cost drivers, Target Costing/Target CO2, Cost optimization with supplier, Design-to-Cost/Design-to-CO2, Sourcing, Know your negotiation leverage, Optimize production processes, and Measure Tracking (VAVE)

Around 80% of a product's costs and CO₂ emissions are already determined in the concept phase: the choice of technology, processes, and machines in this phase all directly affect later costs. Here, material, form, and functionality are established, which has a direct impact on manufacturing. Changes in dimensions and geometry, the replacement of individual parts, or manufacturing processes in simulations with Tset, can all return impressive results. Changes after the concept phase are only possible to a limited extent and are significantly more expensive. Lower costs enable lower prices and, therefore, greater success in offers and negotiations. Since CO₂ is a relevant and dynamic cost factor, flexible solutions are needed to maintain competitiveness. Thus, continuous optimization in the early design phase is crucial. In summary, the concept phase of a product has the greatest impact on costs, CO₂ emissions, and market success. Through careful planning and optimization in this early phase, companies can achieve significant advantages.

Using a component (flange made from 16MnCr5) as an example, the price per piece can be reduced from 8.10 euros/piece to 5.93 euros/piece and the CO₂ output from 3.28 kg to 0.96 kg/piece through simulation of individual parameters. By changing the manufacturing process (cold extrusion combined with machining instead of solely machining), emissions can be optimized through reduced material usage and in production.

Would you like to know more?

For more information about cost and CO₂ engineering, read our whitepaper: "Carbon reduction in automotive supply chains". Explore the urgency of climate action and business resilience in more detail.

Read now

Whitepaper preview: "Carbon reduction in automotive supply chains"

Author

Kevin Fister
Senior Cost Engineer

24.07.2024

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