Oilfield Service Company Saves $150,000 in Hidden Overhead Costs by Value Engineering an Established Product Line

Redesign outdated downhole tool for streamlined manufacturing

The customer had a 40-year-old commercially successful downhole tool product line which has generated acceptable margins since its initial launch. Unfortunately, the multi-piece complex design and complex BOM generated high hidden overhead costs because the inventory of required on hand subcomponent parts generated hundreds of PO's and inventory transactions each year. Several tool shipments were delayed each year because of shortages of subcomponent parts. The assembly's complexity required dedicated in-house specialized manufacturing staff and shop space. The tool needed to be value engineered to simplify the design, but was a low priority within the engineering backlog because the product line generated acceptable margins and the hidden overhead costs were not readily visible.

Modernize design and align with customer requirements

National K Works (NKW) was commissioned to redesign the product line within the customer's engineering practices and processes. Given the original design, NKW was tasked to modernize for current standards and to simplify it for more cost-effective manufacturing.

NKW created the new design using its ReAct™ accelerated product commercialization and life-cycle extension service. The service aligns to the client's engineering standards, has incremental design gate reviews to ensure project oversight and the service provides designs optimized for commercial manufacturing. Outsourcing redesigns helps customer's busy in-house engineering team stay focused on more strategically important projects.

Simplify tool design and create a LEAN manufacturing model

NKW combines two types of expertise: designing for downhole applications and designing for manufacturing, to create a simpler and more reliable tool. The simpler tool is now being produced by an outside vendor on a just-in-time basis. The complex BOM was replaced by a single part number within the customer's ERP system. One PO replaces what use to take 30 POs. The hidden labor costs of purchasing, planning, logistics and inventory were eliminated. Manufacturing labor and floor space were redirected to other product lines. Cash is no longer tied up in inventory. Local personal property taxes are no longer paid on inventory.

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