December 2004

Better Product Designs Make U.S. Manufacturers More Competitive

A new study by Nicholas Dewhurst and David Meeker finds that manufacturers can shave costs from the production process by redesigning products to reduce part counts and labor

By Karen M. Koenig

According to the study by Dewhurst and Meeker, despite lower labor costs in many Asian countries, it may not be cost-effective to send a product design overseas for manufacture. "Hidden costs," such as such as loss of manufacturing control, offshore management costs and added time needed for shipping and delivery all need to be considered.
Issues and Costs to Be Considered Before Manufacturing Offshore

* Legal issues

* Theft/piracy of design

* Cost of transition

* Loss of manufacturing control and flexibility

* Cost of additional inventory needed to carry due to shipping

* Cost of additional paperwork

* Cost of managing offshore

* Cultural/communication difficulties

* Increasing labor costs once a vendor relationship is established

* Cost and added shipping time of bringing a project back to the United States

* Cost of employee morale to remaining U.S. employees

* Cost of layoffs and severance

Source: Improved Product Design Practices Would Make U.S. Manufacturing More Cost Effective

It may not be necessary to move jobs offshore in order for a company to remain profitable, say Nicholas Dewhurst and David Meeker, authors of "Improved Product Design Practices Would Make U.S. Manufacturing More Cost Effective - A Case to Consider Before Outsourcing to China."



Dewhurst, the executive vice president of Boothroyd Dewhurst Inc., and Meeker, a consultant with Neoteric Product Development, propose that manufacturers can cut costs by redesigning products to reduce part count and cost. This savings would help level the advantage Asian countries have in terms of lower cost labor.

U.S. manufacturers, however, must act soon in order to keep business home, Meeker says. The residential furniture industry, for example, has already lost thousands of jobs - and billions of dollars - to offshore manufacturing, particularly in the wood bedroom furniture sector.

Last year, China shipped $1.16 billion in wooden bedroom furniture to the United States. It has since doubled its U.S. market share to 48 percent, since 2000.

To find out what additional steps woodworkers should take to remain competitive domestically - and issues to be considered before moving to offshore manufacturing - Wood & Wood Products queried Meeker for his insight into the topic. For a copy of the study, visit www.dfma.com



Your study suggests that U.S. manufacturers can stem the tide of offshore imports simply by redesigning their products to streamline the production process. However, in the furniture industry for example, much of the business going offshore is labor-intensive in nature, i.e., a hand-carved wood bedroom suite. How does this "mesh" with your theory?

What our study in a nutshell says is threefold: 1) Understand your total cost - all facets - in as much detail as possible; 2) Applying a Design for Manufacture and Assembly approach to redesigning your product may yield significant savings so you don't need to go overseas; and 3) If you do decide to go overseas, make sure you understand all the costs associated with doing that.



The study recognizes there are products that have a large portion of their cost as labor and that these products may be good candidates for offshore manufacture. However, what we strongly suggest is that a complete look at the product cost and all the cost of offshore manufacturing be taken into consideration before a decision is made.

Wood Furniture Parts: Top 5 Importers

January-September 2004

(Values in $1,000)

1. China $165,172

2. Canada $149,846

3. Mexico $62,355

4. Malaysia $28,834

5. Italy $25,311

Source: U.S. Department of Commerce, International Trade Administration

China accounts for almost one-third of the $558,236,000 worth of U.S. wood furniture components imported in the first nine months of the year.

Please explain what is meant by "Design for Manufacture and Assembly?" Can you give an example of how a wood component or piece of furniture can be redesigned to reduce part count and cost?



DFMA is a systematic procedure that allows companies to understand and manage product costs from the earliest stages of the product's development.



In an example from the aerospace market, when Airbus first entered the commercial market Boeing did analysis work to understand how Airbus was building its product. In the case of a passenger door, Airbus hogged the bulk of the assembly from a single billet of aluminum using a high-speed machining center, as opposed to building up the door frame from lots of parts and subassemblies.



Consolidation of parts is one way to lower cost, along with using new processes and equipment to lower labor content. Many in the wood furniture industry are also turning to CNC machines to cut complex parts that in the past would have been made from several smaller pieces or by hand.



What's to prevent offshore companies from redesigning products as well, making their products even less expensive than those manufactured domestically?



As we point out at the end of the paper, nothing prevents you from sending the DFMA redesigned products overseas to be manufactured and nothing prevents offshore companies from doing the same.


Hourly Compensation Costs for Production Workers in Manufacturing Based on U.S. dollars 2003 figures



United States $2

Have something to say? Share your thoughts with us in the comments below.