Caterpillar Uses New Tool to Reduce Steel Costs

Soaring costs for metals and plastics are putting a newemphasis on cost reduction at major OEMs, such as Caterpillar in Peoria, IL.Two managers, Nelson Jones and Syamala Srinivasan, developed a computer-basedsystem to run CAD-based feature analysis on thousands of mechanical components,replacing a manual spreadsheet system that was too consuming for engineers.They're looking for a fast way to identify designs that offer potential forsavings.

While their program was developed a few years ago,Caterpillar is just now deploying it across the company, scouring thousands ofCAD files looking for redesign and other cost-saving opportunities through aspin-off company called Akoya.

"They're clearly achieving savings of 5 to 7 percent on abroad category of mechanical components such as forgings, castings, tubing andsteel plate, which is significant considering the increases in steel prices,"says Brett Holland, president of Akoya, which has three other active customersfor its cost management software.

The key aspect of the Akoya approach is a feature it calls competitivebanding analysis, which provides a price range in which companies can acquirea component in its market from an effective producer. So in other words, itdoes more than analysis just for the design features; it also looks at pricespaid for similar products across the company and compares them to"should-costs" for the same product based on data in the computer program.

The Akoya program builds on top of cost-management programsthat engineers use at many companies to determine the most cost-effectiveapproach as they design. These include tools such as Design for Manufacturingand Assembly (DFMA) from Boothroyd &Dewhurst and Costimator from MTISystems.

"Typically, we conduct workshops of 20 or so people when weget all of the key decision makers together and examine all of the parametersthat affect cost as shown through the competitive banding process," saysHolland. Specific targets are identified in those meetings, such as redesign,renegotiation and new supplier development. Specific individuals are givenresponsibility and dates are stipulated for review.

Hollandsays competitive banding workshops have consistently generated over $1million in savings per workshop. Specific benefits he cites include:

For one customer, Akoya identified a price band for aflywheel housing of $9.71 to $10.35. The OEM was paying $14.74 for the part,30 percent above the competitive band. The company bought 133,000 of the partper year, representing significant lost profit. Some of the features such assports and drill holes represent redesign opportunities. As a result of changingvarious factors, the cost was moved into the competitive band.