Original Date: 04/20/1998
Revision Date: 01/18/2007

In the past, ITT Aerospace/Communications Division (A/CD) determined unit costs after production rather than as part of the design phase. Design engineers focused on performance and paid minimal attention to recurring unit production costs. As a result, the necessary cost reduction efforts became a post design release process driven by senior management who instituted reductions to remain competitive. Cost reductions also involved suppliers and operations, and often resulted in hardware elements being redesigned to accommodate a lower cost approach.

ITT A/CD revised its practices, and established Design-to-Cost (DTC) Reduction Planning to meet changing customer contract objectives and to compete more aggressively. The company consolidated the disjointed sections of its previous practices into a structured system. ITT Aerospace/ Communications Division also established objectives to meet contract-mandated, unit-cost reduction quotas, and used measurements to evaluate the Integrated Product Development (IPD)output of the process. The DTC system integrates all elements of the design and manufacturing processes. First, management establishes competitive cost targets. Next, the BOMs and all manufacturing information are loaded into the material requirements planning system. Labor estimates are then calculated, and advanced manufacturing and test engineering personnel work with suppliers to cost any custom requirements. A first draft of the design-to-unit production cost is established, and then the design and manufacturing processes are reviewed again for completeness and data validation. The unit cost is baselined, and management compares this cost to the cost target. In addition, management identifies any additional cost considerations. The unit cost is then updated with quotes and all factory, assembly, and test operations information for a second draft. The final unit cost is negotiated with the customer.

DTC Reduction Planning enabled ITT A/CD to compete more aggressively, resulting in contract awards for entire production lots. The system provides objective measurements of IPD outputs; fosters organizational culture change; and promotes innovative thinking. The process is now embedded in all programs which require production hardware, including low volume projects. ITT A/CD exceeded its cost targets which resulted in a unit price reduction of 75% between 1989 and 1998.

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