CHAPTER 14 – When Cost Improvement Goes Wrong
We considered putting a moderately humorous, somewhat sarcastic rubric in this
chapter. Unfortunately, we believe it would probably be misunderstood. Perhaps we
will save that idea for a magazine article.
II. Questions to Ponder
• How can we tell when a cost improvement opportunity is a problem laying in
• Should all cost improvement projects have the same level of diligence as typical
product development projects—do we omit steps?
• Ponder a time when you were involved in a cost rationalization or improvement
exercise. What do you think went awry?
• Consider what warning signs may be available to tell us that a given cost
reduction is more liable to be a cost catastrophe.
• How would we account for risk when we make a cost reduction?
III. Cost Improvement Scenario 1
Recently, a project was concluded that delivered an electronic control unit (ECU)
into the vehicle. At the start of this introduction we notice some failures of the product
at the manufacturing facility. This was not deemed to be a catastrophic situation. By
the time the levels of failures become really noticed, there are signicant parts in the
eld. We eventually see the failures show up at our product return facility. There are
so many failed parts being returned that it is nearly impossible to move around the
facility. We are seeing failures of parts that have replaced the rst parts in the system.
The nature of the failure is the graphics display in the product.
Determine the reason for the failures and provide a corrective action.
Explore the reasons for the failure and develop a corrective action. Given the
severity of the problem, costing the company millions of dollars in warranty dollars,
and nd a quick solution. We are given considerable freedom in determining the
appropriate corrective action.
Two immediate solutions were proposed. Those solutions are:
1. Find real root cause and correct
2. Find a way to substitute a later generation product