Cutting Costs of Custom Engineered Products by Three Times the Target
Client Context
A global supplier of engineered cooling systems for the power generation industry sought to become more price competitive by reducing the Cost of Goods Sold (COGS) by 5% across three major product groups.
The company was losing global market share due to non-competitive pricing, with product prices 10-20% higher than competitors. Historically, customers had been willing to pay a premium for the company’s highly engineered, customized solutions, but as the market became more competitive and cost-conscious, customers were no longer willing to accept the price differential.
Additionally, the company’s global offices in Europe, the U.S., and Asia operated independently, limiting cross-product knowledge sharing and preventing the organization from fully leveraging its global engineering capabilities.
Key Challenges
- High product costs leading to declining market share.
- Lack of standardization across three product groups.
- Limited cross-product knowledge sharing across global offices.
- Need to establish a single engineering approach across all regions.
Approach & Key Success Factors
EFESO applied a structured Value Engineering approach to redesign existing products and identify cost-saving opportunities.
1. Value Engineering & Product Standardization
- Conducted 11 workshops over 10 months with interdisciplinary teams from three continents and six offices.
- Brought teams together to systematically challenge all aspects of product design and find commonalities across product groups.
2. Knowledge Sharing & Engineering Alignment
- Identified opportunities for design standardization to improve cost efficiency.
- Developed an implementation infrastructure to manage design changes and track cost improvements.
Results
200+ cost-reduction proposals
Developed across three product groups.
Product cost savings ranged from 10% to 30%
Depending on the product and geographic market.
Total proposed savings of $30 million
Exceeding the $11 million target by 3x.