DfX convention: how to reduce cost of ownership across the total value chain

Conventional lighting products at the end of their lifecycle face a number of challenges. On one hand, the business is challenged by declining volumes, owing due to the rise of LEDs. On the other, there are huge opportunities to grow market share in the emerging markets by taking benefit of the ‘golden tail’ (last man standing).

By Thomas van Damme, Consultant Innovation Management, Industry Consulting, Philips Engineering Solutions and Hans Hoff, Consultant, Senior Consultant, Industry Consulting, Philips Engineering Solutions

Image: Three levers for ongoing improvement of the innovation management process

Key to establishing sustainable business in the years until LED has fully taken over, is decreasing the price point to an absolute minimum. In the case of a mature product category such as conventional lighting, however, this is not an easy route.

Running a DfX convention

As an approach, the business organized a series of Design for eXcellence (DfX) conventions to screen the total cost of ownership of the product category. In tightly scheduled, high-speed DfX convention projects, the DfX project team focuses on the product category for eight weeks, in a holistic way. A structured, step by step approach generates ideas for reducing the total cost of ownership for the business.

33 different tools are used during the eight week convention to generate ideas and look at the business from several different perspectives, and eventually a funnel of ideas is created. The funnel is further prioritized based on cost impact and required investments. This brings the ideas to higher maturity levels, until a full business case for each is available and ready to be decided upon by the management.

As a result, the total committed saving implementation was more than double that of initial expectations for this very mature product. In addition, some of the specifications were fine-tuned to create products with highest value to the customer and the product portfolio has been optimized to help suppliers improve their production efficiencies.

“The team learnt a lot from this convention and delivered a very good result highly recognized by management team. Thanks a lot!”

Image: Total overview of a DfX convention

During a preparation phase the DfX Convention scope and target are determined. Which product group should be in focus, given spend volumes and past cost reduction activities? A so-called White Spot Analysis is also executed. This joint team activity identifies where savings may be expected and which tools to apply. Based on this analysis, the convention can be planned and prepared in detail.

The DfX convention has several phases. The first phase is idea generation, based on analysis (e.g. product tear down, value stream mapping, value analysis). The most promising ideas are detailed and evaluated towards a business case. This is ultimately summarized in a ‘decision sheet’, which includes an idea description, its benefits and required investments and resources. The decision sheet forms the basis for management decisions and commitment. Throughout this process, each idea is awarded implementation level (IL) status. IL1 indicates a rough idea, which has not yet been evaluated. IL3 status means an idea has been fully evaluated and has received management commitment for implementation.

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