Application of the virtual benchmarking methodology, leading to immediate cost savings
Industrial goods & services, Operations management

Application of the virtual benchmarking methodology, leading to immediate cost savings

A global manufacturer of electricity-infrastructure equipment, together with ADL, took the most efficient way of competitive product benchmarking


Challenge

High material-cost levels and emerging competitive pressure


In the market for gas-insulated switchgears, traditional market players are facing increased low-price competition from global Korean players and rising Chinese manufacturers.

Key value propositions such as compactness and product reliability tend to be less important in the cost-sensitive emerging markets.

Together with our client, we’ve set-up a short-term planned benchmarking project to identify the main cost gaps in regard to global competition products.

Approach

Introduction, continuation or elimination


Arthur D. Little employed a holistic benchmarking approach following a strong value-engineering structure.

As our client was not able to acquire the competitor products for a real-life hardware comparison due to time and compliance restrictions, we set up our senior-expert network with a database with all relevant data (e.g., pictures, brochures, user manuals, main dimensions, technical specs) for the benchmarking targets.

 


The project followed a three-phase structure:
Phase 1: Collection of information of competitors’ products, assessment of clients’ internal previous projects
Phase 2: Cost analysis of the client product, segmentation into components, analysis of customer requirements and norms, BOM analysis
Phase 3: Analysis of competitor product design and solutions, including cost valuation, cost calculation based on a hypothetical client product, and value engineering based on learnings from competitors

 


During the project, ADL implemented a systematic framework for interactive and interdisciplinary benchmarking to reveal cost and engineering potential, as well as release stuck internal discussions on technical solutions, by introducing external facts. We provided significant cost reduction potential not only for the focus product, but also for the whole product range.

Value

Significant savings


The identified potential summed up to 11% in direct material cost savings, which were also transferable to other product families.

11% direct material-cost savings; half of the identified savings were immediately addressable with no or minimal engineering efforts

We were highly impressed by the side-by-side working approach of ADL together with our engineering team, and the deep technical understanding the consultants brought to the case work