Latest / The Buyer's Side with Fexingo: Procurement, Sourcing, and B2B Purchasing Decisions / How One Buyer Used Value Engineering to Cut Component Costs 17 Percent
Transcript
- Lucas: Last month I talked to a senior buyer at a mid-tier auto parts supplier, and she walked me through a value engineering project that saved them seventeen percent on a key braking component. Not by switching suppliers—by redesigning the part with the existing supplier’s help. Luna: Seventeen percent is serious money on a high-volume part. What exactly did they change? Lucas: They replaced a machined steel bracket with a stamped steel version. Same material family, but the machining step was eliminated. That alone cut the unit cost by about eleven percent. Then they relaxed a surface-finish tolerance that didn’t affect function — that got them another six. Luna: It’s interesting that the supplier was on board with that. Usually a supplier might resist because it changes their process. Lucas: That’s the key. The buyer had a multi-year relationship with this supplier, so they were willing to share cost breakdowns and engineering data. The supplier actually suggested the stamped bracket alternative because they had the stamping capability in-house. Luna: So it was a collaborative win-win. And it reminds me — if these kinds of conversations have moved your work forward in some small way, a couple of dollars a month is genuinely what keeps these going. Buy me a coffee dot com slash fexingo, if you’ve gotten something out of them. Lucas: Yeah, it makes a real difference. And that buyer’s story is a great example of how value engineering goes deeper than just asking for a lower price. Lucas: Let’s break down what value engineering actually is. It’s a systematic method to improve the 'value' of a product by examining its functions and then finding ways to deliver those functions at a lower cost without sacrificing performance or quality. Luna: Right. So it’s different from should-cost modeling, which estimates what something should cost based on materials and labor, but doesn’t necessarily change the design. Lucas: Exactly. Should-cost is a negotiation tool. Value engineering is a design tool. In this case, the buyer didn’t just say 'your price is too high.' She asked the supplier, 'What would this part look like if we optimized it for cost from scratch?' Luna: And the supplier responded by looking at their own capabilities and suggesting a change that reduced labor. That’s a level of trust you don’t get in a transactional relationship. Lucas: It also required the buyer to go back to engineering internally and get approval to sign off on the tolerance change. That’s a hurdle — engineers often over-specify because they’re risk-averse. Luna: How did she get engineering to agree? Did she have to run tests? Lucas: She did. They ran a small batch with the relaxed surface finish, tested it for wear and fatigue, and the results were identical. That evidence made engineering comfortable. Lucas: The whole project took about four months from initial conversation to production approval. But once approved, the new part went into all new vehicles using that braking system, and the annual savings were around two hundred thousand dollars on a single component. Luna: For a mid-tier supplier, that’s a big number. And it came from a relationship investment, not a reverse auction. Lucas: Reverse auctions can squeeze a price, but they typically don’t change the underlying cost structure. Value engineering attacks cost at the source. That’s why procurement teams that master it tend to see bigger and more sustainable savings. Luna: What are the risks? If you relax too many tolerances or substitute a cheaper material without enough testing, you could end up with quality issues. Lucas: Absolutely. That’s the biggest risk. The buyer in this case was careful — she only relaxed a cosmetic tolerance. Functional tolerances she left untouched. And the material substitution was an equivalent grade of steel. Luna: So it pays to be conservative. But also to trust the supplier’s expertise on what’s feasible. Lucas: Right. The supplier knew their stamping process could hold tighter tolerances than the original design required, so they proposed it. That kind of insight only comes when buyers bring suppliers into the early design conversation. Lucas: Another thing: value engineering isn’t just for manufactured goods. It works for services too. You can examine the functions of a service — like logistics or IT support — and find cheaper ways to deliver them. Luna: Give me a quick example. How would that work in logistics? Lucas: You might bundle shipments to reduce per-unit freight cost, or switch from overnight to two-day delivery for non-critical items. That’s functionally equivalent but lower cost. Luna: So value engineering is really a mindset: constantly asking, 'What are we really paying for, and is there a cheaper way to get it?' Lucas: Exactly. And it requires cross-functional teamwork. The buyer in our case had to coordinate with engineering, quality, and the supplier’s production team. She also had to sell the change internally to management. Luna: Was there resistance? Sometimes managers see cost reduction as purely a procurement responsibility. Lucas: There was some pushback from the engineering director who didn’t want to change a validated part. But once they saw the test results and the cost impact, they came around. Lucas: The buyer also used a simple value analysis: the function of the bracket is to hold the brake caliper in position. The stamped version does the same job, just with a different manufacturing method. So the value — function per cost — increased. Luna: That’s a clean way to explain it. Do you think small procurement teams can do value engineering without dedicated design engineers? Lucas: Yes, but they need to cultivate supplier partners who have engineering talent. Or they can hire contract engineers for specific projects. The key is to have someone who can ask the right questions about the product’s function. Luna: So it’s more about the approach than the headcount. The buyer in your example didn’t have a six-sigma black belt — she just had a good relationship and asked smart questions. Lucas: Exactly. And she documented the savings meticulously. That helped when she wanted to apply the same method to other parts. Now she’s working on a hydraulic pump assembly with the same supplier. Luna: That’s the multiplier effect. One successful project builds the case for more. And it strengthens the supplier relationship because they see you as a partner, not just a negotiator. Lucas: Right. And that’s the real takeaway: value engineering is a collaborative, data-driven, and sustainable way to reduce costs. It’s not a quick fix, but the savings compound over time. Luna: So if you’re a buyer listening, maybe start with your top-spend parts and ask your supplier: 'What would you change if you could redesign this from scratch?' Lucas: That’s a great starting point. Just be ready to do the testing and sell it internally. But the payoff can be significant. Luna: Thanks for sharing that case, Lucas. It’s a perfect example of procurement as a value driver, not just a cost center.