Tooling Costs taking away your margins ?

The Problem with Tools

Project schedules in the manufacturing sector, and particularly products like automobiles & heavy equipment are getting compressed as organizations are adapting to rapid change in customer needs by offering a greater product variety. These organizations are also looking to reduce cost in their programs through outsourcing of non-core activities to a wide range of low-cost suppliers.

The effect of these activities is becoming apparent in an area which encompasses the entire manufacturing sector; the management of tooling. As the focus on tooling begins late into a new project, it receives reduced attention in terms of cost, schedule and design and manufacturing importance and is one of the first activities which is outsourced to the supply chain. This has ultimately led to increased cost & complexity and reduced effectiveness of tooling management.

An Analysis of the Problem

Some of the commonly observed problems in plants around tooling are:

A root cause analysis of these problems throws up a few common causes:

Manufacturing companies need to address these causes quickly, because of the following reasons:

  1. Manufacturing facilities are going to witness an increase in the number of product variants they produce; tooling needs to be more flexible than ever before.
  2. The number of tools (and consequently, their cost) needs to be reduced to a viable quantity.
  3. Tools need to be made common across products in order to reduce complexity, particularly in inventory management.
  4. Tooling design and manufacturing needs to be standardized.
  5. The plant and its suppliers need to be integrated and work together from the concept stage until the tooling is proved on the shop floor.

Tooling Management Strategies

Modular Product Design

LEGO is probably the most appropriate example of modularization; most of us can vividly remembers the joy of building complex structures using a large number of similar blocks. Two aspects stand out; the ease at which a structure could be dismantled and the flexibility of design.

Modular design can be defined as the organization of a complex system into a number of smaller, complementary, and distinct components, which can be designed separately and then assembled to form the entire system again seamlessly. Modularity offers the best of two worlds; It is standardized enough to be cost efficient; yet is tailored enough to meet specific customer needs. The concept of modularity fundamentally includes three aspects: break systems into discrete modules, ensure modules can interchange with each other and provide well defined interfaces. The advantages of modularization across different functions are:

Function Advantage Description
Design Increased reliability Easy to test individual modules for specific problem areas. The reliability of the whole system increases by improving individual modules & interfaces.
Reuse of design & materials Reusing modular components in multiple products creates economies of substitution, saving time and money in design
Manufacturing Changeover cost reduction High volume of standardized modules leads to reduction and the number of tools required for production.
Better process planning Is enabled through using the same units for more product variants.
Agility & flexibility Manufacturing of more models independently and concurrently
Supply Chain Inventory reduction Reducing the number of unique parts leads to simpler stock keeping.
Improved supplier management A smaller supplier base with higher volumes enables strategic supplier relationships, which means higher trade credits, prolonger payment deadlines and better pricing.
Supplier involvement in design Improved feasibility testing and making use of other unique supplier design capabilities.


As engineering projects get more complex, the case for standardization gets stronger. Though initially, the drive for standards came for physical products and later for storing and exchange of information, there is now a proven case for standardization in the way programs are executed too. In terms of product development, standardization can occur at 4 levels: part, product, process & procurement.

Product Non-modular Modular
Modular Parts Standardization Process Standardization
Non-modular Product Standardization Procurement Standardization

The table below provides a description of each kind of standardization.

Type of Standardization


Part – Common parts reduce inventory due to risk pooling and costs due to economies of scale.

– Excessive part commonality will however lead to reduced product differentiation.

Process – Standardize as much of the process as possible and customize as late as possible.

– Make a generic of family of products and differentiate later into a specific end product.

Product – Downward substitution- Produce only a subset of products.

– Guide customers to existing products and substitute products with required feature sets.

Procurement – Pool demand across a wide variety of products.

– Stock a lesser number of unique parts based on requirement.

Standardization in tooling would determine how many different tools are required for assembly, alignment, calibration, testing, repair, and service. A Company-wide tooling standardization could be determined as follows:

  1. Analyse tools used for existing products.
  2. Prioritize usage histories to determine the most “common” of existing tools.
  3. Work with people in manufacturing/service to determine tool preferences.
  4. Coordinate common tool selection with common part selection.
  5. Issue common tool lists with common parts lists.

The benefits of standardization as applicable to tooling are :

  1. Cost reduction: through purchasing leverage and reduction in inventory, floor space and overheads.
  2. Quality: Through better quality of products, continuous improvements and vendor base minimization.
  3. Flexibility: By eliminating set-ups, simple supply chain, milk-run type deliveries and flexible manufacturing techniques.
  4. Responsiveness: Due to interchangeability, build-to-order method, better parts availability and faster delivery times from vendors.

Some challenges faced by adopting modular design and standardization are:

  1. High initial investment
  2. Loss of customer centricity
  3. Complexity of co-ordination
  4. Supply chain risk
  5. Low flexibility for unique cases
  6. Requirement of broad skills
  7. Management of Intellectual Property

Product Architecture- The Philosophy of Product Design (Yang & El-Haik, 2003)

Product architecture forms the framework for enabling robust design. It is the way in which the functions of a system are mapped to its sub-systems. A deep understanding of product architecture is required to implement both standardization and modular architecture. Product architecture is also deeply linked to systems based engineering and has profound implications in how a product is designed, made and sold.

Based on how a function is mapped to a sub-system, three types of mapping can be defined:

This mapping is used to classify architecture in two ways; modular and integral architecture.

  1. Modular architecture: – one-to-one mapping between functions and building blocks, and its interfaces are de-coupled.
  2. Integral architecture: -complex (N-to-M) mappings between the functions and the building blocks, and its interfaces are coupled.

Most products are designed somewhere between integral and modular and are hybrid, as shown below:

The two kinds of architectures are compared and contrasted as follows:

Modular Architecture Integral Architecture
Chunks may be integral inside but are independent from each other functionally and physically Chunks may be integral inside and interdependent among each other
Standard, pre-designed interfaces can be used that can remain the same even if internal characteristics change. Interfaces are tailored to the chunks and are dependent on functional behavior
Modules can be specialized to their individual contributions to overall function and can be used interchangeably. Chunks are tailored to their application and cannot be interchanged without requiring changes to other chunks.
Unpredictability of module choice requires over-design elsewhere to accommodate possible mismatches. Overall design can be optimized for a predictable set of functions and implementation.
Standard interfaces are physically separated from the module and this waste other design resources such as space or weight. Interfaces are weak Interfaces can be integral to the chunk, saving space or weight. Interfaces are strong.
Interface management, if planned properly can provide flexibility during production Interface management occurs entirely during design and is frozen; it is not aimed at flexibility after design.
Business performance may be favoured. Technical performance can be favoured.

Concurrent Engineering

Concurrent engineering is a design paradigm used extensively by Companies in the East (particularly in Toyota). It is a business strategy which replaces the traditional product development process with one in which tasks are done in parallel and there is an early consideration for every aspect of a product’s development process.

Concurrent engineering is important in tooling program management because it addresses two issues; the possibility of considering a supplier’s opinion much earlier in the design process and the supplier’s increased know how of the company’s standards for design and manufacturing. This can be utilized particularly to align a company’s targets with the supplier’s capabilities early on in the product development stage. Targets for the supplier in terms of weight and cost reduction can be set simultaneously with the company’s project targets on a reasonable basis. The company will also become aware of its supplier’s capabilities

The Specific benefits of concurrent engineering to tooling design, development and manufacturing are:

  1. Lower manufacturing and production costs.
  2. Improved quality of resulting end products.
  3. Higher reliability in the product development process.
  4. Reduced defect rates.
  5. Increased effectiveness in transferring technology.
  6. Reduction or elimination of the number of design changes and re-engineering efforts at later phases in the development process.
  7. Ability to design right the first time out / First time capabilities.
  8. Overlapping capabilities and the ability to work in parallel.
  9. Improved inventory control, scheduling and customer relations.

Frugal Engineering

The word ‘Frugal Engineering’ was coined by Carlos Ghosn , the Joint Chief of Renault-Nissan and according to him, meant “Achieving more with fewer resources”. Frugal engineering has been popular in Asia and particularly in India, with it’s Indian phrase, Jugaad being used extensively in product design and development. With an increasing number of big multi-national companies setting up Engineering R&D Centers in India and Asia, frugal engineering is becoming an important solution which these companies are quickly adopting into their own way of working. Jeff has also followed the works of the Tata Group with its frugal car, the Nano and wanted to implement its engineering philosophy in managing tools.

The core competence of a frugally engineered product, as explained by the Santa Clara University’s Frugal Innvoation Lab are:

Organizational Enablers for better Tooling Management.

The implementation of any strategy will require the involvement of multiple functions in any company. A constructive tension needs to be built between competing objectives of development cost, product value, performance, quality, and time to market. Functions like strategic planning, operations, cus­tomer support, purchasing, and finance are just as impor­tant to successful innovation as R&D and engineering. How well these very different functions work together in large measure determines how effective a company will be at developing successful products and services. Some organizational enablers would be:

  1. Cross functional teams: Working concurrently and simultaneously on multiple projects, in order to maximise the chances of finding ways to reduce cost and complexity of projects.
  2. Non-traditional supply chains: Suppliers are more integrated into the value chain than ever before, often becoming technology advisors with early involvement in most activities. The basis of interaction with them would change from a transaction model to a partnership model. Jeff would also look to minimize the vendor base and have a few close knit suppliers.
  3. Top-down support: Many innovative engineering breakthroughs have been driven by the top people like Henry Ford , Steve Jobs or more recently, Ratan Tata. They must have the vision and passion to sacrifice short term goals for establishing long term philiosophies.
  4. Stand-alone teams: The pilot teams would need to work independently in order to drive the implementation of the proposed strategies in a timely manner. It would be hard for them to push new ideas and implement them within a large organization.
  5. Program management focus: All the stakeholderes would need to work towards achieving a pre-established goals, with clearly defined objectives in a set timeline. A dedicated program management would need to provide technical support to the strategists, break down barriers to putting ideas into action and help streamline implementation.

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