Cost reduction projects are often associated with aggressive price negotiations or short-term savings. In practice, sustainable cost reduction requires a structured understanding of cost drivers, supplier capabilities, and quality constraints.
This project revisits a real sourcing initiative I led to reduce the cost of aluminum CNC-machined parts. At the time, the project was driven by business urgency rather than formal Six Sigma methodology. Looking back, the decisions and trade-offs made during the project align closely with the DMAIC framework, particularly in balancing cost, quality, and supply risk.
In this series, I will walk through the project step by step, reframing it through a Six Sigma lens: DMAIC
DEFINE – Project Definition
Problem Statement
Aluminum CNC-machined parts accounted for a significant portion of the total BOM cost of medical equipment. With increasing production volume the existing sourcing model, primarily based on local Canadian suppliers, created cost pressure without adding proportional technical or quality value.
Project Objective
The initial objective of this initiative was to achieve a minimum 20% unit-cost reduction for selected aluminum machined parts while maintaining all quality, dimensional accuracy, and regulatory compliance requirements.
Project Scope
In scope:
- Supplier sourcing and evaluation
- Cost structure comparison between local and offshore suppliers
- Commercial negotiation
Out of scope:
- Major product redesign
- Material changes
- Functional specification changes
Business Impact
The project ultimately delivered a 30% unit-cost reduction, exceeding the original target. This improvement significantly enhanced BOM efficiency and created a more competitive and scalable cost structure to support long-term production growth.
Critical to Quality (CTQ)
Cost reduction efforts were constrained by the following non-negotiable requirements:
- Compliance with engineering drawings and tolerances
- Consistent machining quality and surface finish
- Conformance to standards (RoHS)
