C-O-S-T: Cost Optimization System and Technique

By Craig Theisen

Why do companies exert high effort to reduce the costs of products that are production? Because they can! Because unnecessary product costs were not removed during product development.

C-O-S-T, short for Cost Optimization System and Technique, details how a company’s product development teams, their supporting functions, and company leaders can optimize product costs before production starts and thereby maximize lifecycle profits.

Since product development teams determine product costs imparted to new products, much of the book details how these teams optimize product costs. The book also includes ways company leaders can create and sustain company-wide engagement in optimizing product costs and keeping the resulting increased profit margins.

The reader is entertained while observing a three-day workshop where executives of a fictitious company, Defender Products, Inc. are being taught the C-O-S-T system by its developers. The story flows like a business workshop with slides, dialog, and break-out sessions.

The content will benefit all companies that design, develop and manufacture products.

• Language: English
• Publisher: Business Expert Press
• Release date: Mar 4, 2022
• ISBN: 9781637421666

Craig Theisen

Craig Theisen enjoyed 35 years in the highly competitive automotive parts supply business. His experiences in product development, research, sales, quality, general management, and product management had a common element – automakers wanted parts to meet their requirements, have high quality, and low, total cost. Recognizing these customer wants, Craig led the development of a system to optimize product costs during the product development phase, before the products went to production. The system resulted in hundreds of millions of dollars of lifecycle cost being removed prior to production starting.

Book preview

Introduction

Companies that operate in markets where they compete on price are constantly seeking to lower their costs to generate profit at market prices. For many of these companies, costs of goods sold, COGS for short, are their largest category of cost.

The COGS of a product are the materials, labor, and overhead costs that can be tied directly to the manufacturing of the product. If a product is generating a low profit in production, it is difficult to lower cost by reducing COGS. The product design is complete, the tooling and equipment to manufacture the product are built, and the value stream to manufacture the product is established. Changing COGS when a product is in production can be costly, risky, or in some cases, not possible.

In instances where savings in COGS are achieved after production starts, the company absorbed those higher costs the entire time from when production started until the costs were removed. The focus of C-OS-T is to remove these costs from products before production begins.

C-O-S-T is a Cost Optimization System and Technique that enables employees of the business to optimize the cost of goods sold of their products during the product development cycle. Teams of employees that design products, tools, and equipment to make the products, and value streams where value flows from suppliers to customers, make thousands of decisions daily that impact the COGS of products. C-O-S-T helps them make decisions that optimize the COGS.

There are many demands placed on product development teams as they develop new products and launch them into production. These include meeting product requirements and specifications, meeting customer schedules, achieving spending budgets, following company product development processes, meeting product and business function key measures, and many more. Frequently these constraints conflict with the product development team’s ability to optimize cost. For example, if a product engineer is challenged by a key measure to minimize the amount of time spent developing a product, he or she will be less inclined to explore design alternatives that optimize cost of goods sold. The alignment of key measures to achieve optimized costs of goods sold reduces distractions that inhibit the achievement.

While the book focuses on optimizing COGS, there is also a discussion about aligning operating expenses to facilitate the optimizing of COGS. Operating expenses are the costs of maintaining business operations. Rent, utilities, research and development, and administrative wages are some examples of operating expenses. Operating expenses can and should also be aligned with the goal of optimizing cost of goods sold.

The practice of the C-O-S-T approach will yield results within three months. Within two years, even large, global companies can establish a culture of cost optimization throughout their organizations.

This book is for employees in all functions and at all levels in companies that develop and manufacture products. The members of the product development team will learn how to optimize COGS during the product development phase. Managers and executives will learn how they can systematically support and encourage the product development team in optimizing COGS. Whether you are a company executive, a department manager, a product development team member, or an associate building products in the factory, C-O-S-T will prepare you to help your company optimize COGS.

The cost optimization system and technique is explained as readers observe it being taught during a three-day executive workshop at Defender Products, a fictitious company that supplies products to automakers. The automotive industry is extremely cost competitive and most companies in the supply chain compete on cost. While automotive is a fitting example for the book, C-O-S-T will help companies in many industries optimize their COGS.

You are invited to experience the book as an observer in the workshop. Please pull up a chair around the table and enjoy the workshop!

CHAPTER 1

The Executive Workshop Kickoff

The executive workshop began with the exchange of usual pleasantries. Chris Thorpe and Tony Joysen of C-O-S-T, Inc. are meeting with the executive team of Defender Products, Inc. Defender has annual sales of just over $500 million and makes headlining systems for the automobile industry. It has five manufacturing plants in North America from which it produces 23 different headlining systems. The annual sales of the different headlining systems range from $10 million to $35 million. A typical headlining system will remain in production for three to four years after which the design and content may be changed by the automaker for a vehicle design update or complete redesign.

Chris and Tony are at Defender to present a business process they developed that helps companies optimize product costs during the development of the product. The workshop was organized because of a prior meeting between Chris Thorpe and Bill Johnson, the CEO of Defender. Mr. Johnson wanted to learn more about the Cost Optimization System and Technique (C-O-S-T) that Chris’ company had developed. Chris informed Mr. Johnson he believed C-O-S-T could improve Defender’s product costs by at least 3 percent. That would mean a cost reduction of $15 million per year for Defender Products. The cost reduction would be realized through a comprehensive system that enables intensive focus on optimizing the cost of goods sold for products during their time in the product development phase.

Mr. Johnson believed C-O-S-T would help Defender to make a step change improvement in their product costs and profitability. He suspected Defender’s product cost could be 3 to 5 percent lower, but they had been unsuccessful in realizing this level of improvement. He confided in Chris that he knew Defender was leaving a lot of cost in their products. Bill said, We have two continuous improvement engineers at each of our five plants and five product engineers doing value analysis to remove cost from our products in production. Each year, they remove millions of dollars of cost from our products in production and identify millions more that cannot be removed. I want to get this cost out of our products before they go into production. I bring this topic up frequently in operations meetings. We also included the objective to improve product cost in our strategic plan this year.

Chris said, "Defender is not the only company that moves products into production that contain excessive costs and then tries to remove them during production. There is an entire industry built around the topic of cost reduction. An Internet search will reveal all kinds of companies and methods, but many of them also focus on removing cost from products that are already in production.

Our method, C-O-S-T, is different. It focuses on removing costs from products before they go into production. It equips your product development teams to optimize the costs of the products they are developing. They learn how to optimize the cost of goods sold inherent in the product design, manufacturing processes, and the value stream through which value flows. The product development teams directly control the product’s cost of goods sold, and costs of goods sold are the largest part of most manufacturing companies’ total cost. Product development teams make hundreds of decisions a day that define the product’s cost and they are in the best position to optimize the cost before the products go into production.

I like to compare product development teams to sports teams. What is your favorite professional team sport Bill?"

Baseball.

"Okay, each player on a professional baseball team has a specific role and responsibility. The pitcher, catcher, basemen, shortstop, and outfielders perform their individual responsibilities in a manner that benefits the team most. They not only play their own positions well, but they work to assist their teammates in other positions to play well. When a first baseman leaves the base to retrieve a hit ball, the pitcher has moved to first base and is there waiting for the first baseman’s throw to get the runner out. The players work individually and together to outperform the opposing team and win their competition. While the players are professionals in their own positions, they do not know how to play other positions at a professional level. However, they do know what to expect of the players and other positions and they also know how they can assist them.

Product development teams can perform like professional sports teams in optimizing product costs. Each team member can be an expert in their own role and know what to expect from, and how to assist, teammates in other roles."

I like the sports team analogy, said Bill.

Chris continued, Product development teams are just one part of an entire company and their success in optimizing product costs requires synergy with the rest of the company. C-O-S-T prescribes how to align the rest of the company to help the product development teams in their quest to optimize their product’s cost.

Bill said, "I agree with your statement that our product development teams are in a position to optimize the costs in our products. I like the idea of having teams of employees from different business functions working together to optimize costs. The idea of putting a few cost experts in place just does not seem effective in my view.

Our product development teams normally consist of 10 employees, from different business functions, many of whom are early in their careers. They include a product engineer, tooling engineer, manufacturing engineer, quality engineer, program manager, purchasing representative, logistic expert, finance associate, and occasionally a few others. Equipping our teams to perform like a professional sports team in a competition to provide the lowest product cost and unrivaled product value for our customers will be enormously powerful for our company. If C-O-S-T can enable us to optimize product costs before we begin producing and shipping them to customers, it is exactly what I am seeking."

Bill looked at his watch and said, I am sorry to appear rushed Chris, but something was squeezed into my schedule, and I am just about out of time for our meeting today. In our short discussion though you have me intrigued that C-O-S-T will help us here at Defender and I want to understand it more thoroughly. I can set up a meeting with you, my executive team, and me for a few weeks out. How much time do you suggest for such a meeting?

Chris replied, There are two options. First is a three-hour presentation to introduce the C-O-S-T system. It is intended to give company leaders enough information to decide if they want to learn more about it. The second option is a very thorough workshop developed for companies that want to deeply understand the C-O-S-T system. It will show your executive team what members of the product development team will learn and do to optimize your product costs. It is a three-day interactive workshop. I assure you the investment of time will be worth it. Our goal in the workshop is to build strong support among the company’s leaders and prepare them to move forward implementing the C-O-S-T system.

Bill said, I know we need to do something and don’t want to delay. Let’s go ahead with the three-day workshop. I will get my management team introduced to the topic and ready for the workshop.

Chris said, "That sounds good Bill.

To help you better understand the C-O-S-T system between now and when we meet again for the workshop, here is a pamphlet that provides an overview of what I intended to discuss with you today."

Bill replied. Thanks Chris. I will be sure to look through it.

Three weeks later, the workshop is in progress at Defender Products’ headquarters. Their headquarters is attached to their largest manufacturing plant. It is in an industrial park in Saline, Michigan, about 50 miles southwest of Detroit. From the Saline location, Defender supplies headlining systems to multiple automobile assembly plants in southeast Michigan.

Mike Gallo, VP of Human Resources, is at the meeting along with the other members of Defender’s executive team. Mike and Chris Thorpe are neighbors and friends. Mike helped Chris get the introductory meeting set up with Bill Johnson. Other attendees include Vince Madden, VP of Manufacturing; Kelly Ronan, VP of Purchasing; Diana Fullmer, VP of Finance; Ron Corbin, VP of Sales; Jack Halstead, VP of Engineering; Jade Parish, VP of Quality; Maria Lopez, VP of Program Management; and Jalen Standish, the plant manager of the Saline manufacturing plant.

Bill Johnson started off the meeting. Bill is a hard-charging CEO who speaks with energy and passion. He is a quick study. Twenty years in the consulting industry has given him familiarity with a variety of business situations and challenges. He became the CEO of Defender Products after completing a consulting contract with Defender focused on development of their long-term product strategy. He was well liked and trusted by Defender’s executive team and Defender’s private equity owners, the Windstar Group out of Boston, Massachusetts. The Windstar Group felt there was opportunity for financial performance improvement and asked Bill to leave the world of consulting and take the helm at Defender.

Look team, Bill began passionately, "We have previously discussed that we are not achieving the profit potential this business offers. Yes, we have managed to make improvement over the past couple of years. Windstar has noticed this and appreciates it. But we know there is opportunity to do better. Windstar is putting more pressure on us to deliver better profitability results. They are expecting better returns from their investment in Defender Products.

Every calendar quarter we seem to be seeking some last-minute miracles or scramble to move money between our balance sheet and income statement to close the quarter at our profit plan. I honestly believe there is room to make a step change improvement that could yield at least an additional 3 to 5 percent pick up on our bottom line—consistently.

We have talked about the need to improve cost. We built the objective of achieving lower cost into our strategic plan two years ago. We are talking it up and expressing the importance of cost leadership throughout the company, but if we are honest with ourselves, we have not followed up with the policy and actions needed to make it part of our company DNA. A daily, weekly, quarterly, annual, and long-term focus on cost leadership has not been systematized. Words and slogans alone are not going to make this happen.

I want us to have optimized performance and consistently deliver optimum results. Knowing all of you as I do, I believe you also desire to consistently raise the bar and outperform. We know the automotive supplier business is tough. Our customers continue to demand more and more from us at lower prices. At the same time, our competitors are getting stronger and are accepting business at lower prices. The pace of required improvement is beginning to exceed our ability to keep up. Without significant changes in the way we manage the costs in our products we risk falling behind our competitors. Increasing our effort in value analysis and continuous improvement programs and asking our suppliers for lower prices every year is not yielding enough. Moving from where we are today to sustaining ourselves as cost leaders in our products is going to require a transformation that involves the whole company. I believe our guests from C-O-S-T, Inc. have the transformational recipe we need.

Three weeks ago, Chris Thorpe visited with me and introduced a method he and his team call C-O-S-T which is short for Cost Optimization System and Technique. I am confident it would benefit Defender’s profitability performance and give us a competitive advantage by doing something our competition is not doing. What intrigues me about C-O-S-T is the systematic way it optimizes product cost before the start of production. Think how many times we have been able to remove millions of dollars of cost from our products after production has started. Our cost reduction goal for this year is 2 percent of sales. That is $10 million! We will achieve the goal, but that means there is at least $10 million of waste in our products to remove. Continuous improvement and value analysis are great tools, but we are absorbing the cost of waste for one, two, maybe even three or more years of production before these tools remove them. It feels good when we book cost savings from products in production but think about how crazy that is. It is like being happy about achieving something that should never have been necessary to achieve in the first place. Those costs should have been eliminated before production started. Unfortunately, on too many occasions some great cost saving ideas cannot be implemented after we start production because we cannot make changes due to prohibitive cost or the risk of interrupting supply to our customers. There are too many constraints once we start production, so we must focus on optimizing costs prior to the start of production."

Excuse me for a second Bill! blurted out Jack Halstead, the VP of Engineering. We’ve been implementing value engineering on our products for the past few years. It focuses on optimizing the product design and is done before we start production. We are not perfect, but we have made progress for sure. I’m not clear why we would need anything more than just continuing to get better at value engineering.

Yeah, it would be nice if we could build your value engineered designs without producing six months of high scrap! said Vince Madden, VP of Manufacturing, with a sarcastic smile. I don’t want to be critical Jack, but the value engineering practice doesn’t seem to consider the impacts on manufacturing and quality like I’d expect. It doesn’t do us any good to save 50 cents a part on the product design and then blow it all with a dollar of extra cost in scrap, labor, and quality control.

Before Jack Halstead could respond to Vince, Bill redirected the dialog saying, "Okay gentlemen. Let’s not go there. Interdepartmental frustration prevents many companies from reaching their highest potential. They build silos between departments. Each department focuses on achieving their own goals without enough consideration of whether those goals are beneficial to other departments or complementary to the overall excellence of the company. It is not any one person’s fault. It is the result of trying to cascade top level company objectives into department level and individual personnel goals. When 10 different departments set goals to align with an overall goal, sometimes it just gets messy and creates conflicts of interest. But that is an issue I believe C-O-S-T will help us recognize and work to overcome.

When Chris Thorpe and I met a few weeks ago, he shared the analogy of getting our product development teams to perform like professional baseball teams. Each team member not only performs his or her role expertly but knows what can be expected from other teammates and knows how to assist other teammates in optimizing product cost during development. This is how we will maximize our product value for customers and beat our competition.

There is nobody around this table who knows how every position on the product development team works. It is safe to say that none of our product development team members knows how every position on the team works. Therefore, we need to count on them to develop and bring their individual expertise to the rest of the team to create a synergy that optimizes the product cost."

Bill looked at Jack and said, Jack, value engineering is helping us, and we all appreciate what the engineering team has done with it. I expect it will continue to be an important part of our system going forward. In fact, in a pamphlet Chris left with me I saw that it is part of the material we will review in this workshop. But we need to do even more because we still have lots of waste in our products that move into production.

Bill turned to Vince Madden and said, "Vince, I think it is safe to say that your manufacturing team is not thoroughly familiar with how product engineering works, but there are ways you can assist them in designing products you can build with less scrap. That kind of approach is what we are seeking.

Let’s allow Chris and Tony get into their presentation. We set aside three days for this workshop and there will be plenty of time for questions and debate. Chris is confident that we will all become believers in the C-O-S-T approach during this workshop. I am asking for your engagement and support. Okay?"

Bill’s team knew by his passion and tone that he honestly believed C-O-S-T would benefit Defender Products. He is a systems thinker with an uncanny talent for seeing how the tentacles of a new program or initiative can reach out into the organization and how it can create synergy across the company. They trusted Bill on knowing what will make Defender better.

As Bill scanned the table, he saw nods of agreement that his team was open to actively learning about C-O-S-T.

Thank you! Bill acknowledged.

"Alright before our guests begin presenting their material, let’s be polite and introduce ourselves. How about we go around the table and have everyone give your name, position, a bit of history on how you came into the position, and your favorite hobby or non-work pastime.

Also, I started the sign-in sheet that is in front of Kelly now so please sign in.

I will start us off.

I’m Bill Johnson, CEO of Defender Products. I came to Defender three years ago when I left the consulting field. I was working with the Defender team on a consulting contract and accepted an offer to come with them full time. Although these days I do not seem to have much time outside of work, my favorite pastime is traveling with my wife."

Bill looked at Vince Madden who was seated to his left and said, Let’s continue around the table clockwise. Vince, go ahead.

Certainly, replied Vince. I’m Vince Madden, VP of Manufacturing. I have been in manufacturing for 32 years starting right out of high school. I came to Defender Products about five years ago from Glaswool Corporation where we made fiberglass insulation. My favorite hobby is woodworking.

Thanks Vince, said Bill. Kelly? Bill said shifting his gaze to Kelly seated next to Vince.

Kelly Ronan, VP of Purchasing. I have been here for eight years. I was previously a purchasing manager at Toyota overseeing purchasing of insulation products. I got to know Ron Corbin and others at Defender and joined the company when they were seeking to fill the purchasing VP opening. I’d say outside of work I enjoy golfing the most.

Mike Gallo joked, Is there anyone in purchasing who doesn’t enjoy golf?

Everyone chuckled.

Sitting around the corner of the table from Kelly were Tony Joysen and Chris Thorpe. Kelly looked to Tony implying he should introduce himself next.

I’m Tony Joysen. I have been with C-O-S-T Inc. since the beginning. I work with clients to get the C-O-S-T approach set up in their operations when they seek our assistance. I, or a member of my team, work closely with clients to set up the system and make sure it is delivering results. Outside of work I spend my time working.

The room erupted in laughter at Tony’s comment and the initial tension in the room was quickly waning.

Tony continued, Kidding aside, I do enjoy work but also ensure I spend quality time with my family and volunteering with a few charity organizations.

Thanks Tony, said Chris still smiling. I’m Chris Thorpe. Thanks for the opportunity for Tony and me to talk with you today. I started C-O-S-T, Inc. believing there was a value that could be offered to companies to reduce their levels of cost to sustain a competitive advantage. I worked in the automotive industry for 35 years in manufacturing, engineering, program management, sales, quality, general management, and product management. I highlight these because as I speak about these functions during our workshop it is from personal experience. My most recent role was in product management where an important responsibility was creating more value and profitability in our product lines. Cost competitiveness was a top criterion for customer value, and I developed a strong passion for reducing cost. I led the development of an approach to reduce the cost of new products in development. Tony was immensely helpful. Six years ago, I decided to focus full time on cost optimization and here we are. Outside of work I enjoy motorcycling and fishing. I actually met Mike Gallo through motorcycling, Chris said while turning to Mike seated to his left.

Mike began, I knew Chris had started C-O-S-T, Inc. and decided to invite him in to talk with Bill about helping us here at Defender.

Mike then looked at Tony Joysen and continued, I am Mike Gallo, VP of Human Resources. I came to Defender Products seven years ago. Prior to that I led HR at a division of Unilever. My job took me from New York City to Ann Arbor, Michigan. When the job was relocated again to Wisconsin, I decided to stay in the area and came to Defender. Outside of work I like motorcycling, gardening, and playing guitar.

Mike then turned to look at Diana Fullmer who was on his left and seated at the end of the table closest to the projection screen.

I’m Diana Fullmer, VP of Finance. I have been here for six years and have been in finance for the past four. I joined Defender Products in the program management function. Outside of work I enjoy jogging, golfing and tennis.

Thanks Diana, said Bill. Let’s go to the other side of the table now. Jalen? said Bill looking at Jalen Standish seated across the table from Diana.

Jalen Standish, Plant Manager of our Saline plant. Like Vince I have been in manufacturing my whole career. I have been at Defender for 10 years and have been running this plant for the last three. I was born and raised here in Saline. Outside of work I hunt, fish, and help my wife with our organic farm.

I didn’t know you had a farm Jalen, said Mike Gallo. What do you grow?

We have a variety of vegetables, berries and farm fresh eggs. My wife is planning to begin farming honey as well, so we’ll be learning about keeping beehives, said Jalen.

That should be interesting, said Mike. Good luck with it.

Eyes shifted from Jalen to Ron Corbin.

I’m Ron Corbin, VP of Sales. I came to Defender at the same time as Vince five years ago. Vince and I worked together at Glaswool, which is one of Defender’s suppliers. I have been in sales my whole career and was at Glaswool for 12 years prior to coming to Defender. Outside of work I like collecting and restoring classic cars.

Ron turned to his left and looked at Jack Halstead.

I’m Jack Halstead, VP of Engineering. I have been at Defender for eight years now. Prior to that I was working at Ford in their noise, vibration, and harshness group. Defender was one of our top suppliers and Charlie Kessler, our CEO prior to Bill, recruited me. My favorite hobbies are snowmobiling in the winter and riding dirt bikes in the summer.

Jack turned to his left and looked at Jade Parish.

Hi, I’m Jade Parish, VP of Quality. I have been at Defender for four years now. I think I am one of the few people around the table that has not been in automotive most of their career. I was leading quality in Iowa for a John Deere plant where we assembled farming equipment. My husband and I wanted to move back closer to home and I was fortunate to get this job with Defender. Outside of work I spend most of my time with our two kids and our large extended family in the area.

Okay, thanks Jade, said Bill.

Bill looked at Maria who was sitting next to him on his right and said, Maria, we’ll finish introductions with you.

Okay I’m Maria Lopez, VP of Program Management. I came to Defender seven years ago and worked for Jack in engineering. I decided to make a career change five years ago when we had a director position open in program management. Outside of work, I enjoy yoga and fitness and have been getting into pickle ball.

What’s pickle ball? asked Bill.

It’s a fast-growing sport where players hit a ball over a net. It combines elements from tennis, ping pong, and badminton. Players use a large, hard paddle and hit a plastic ball, kind of like a heavy wiffleball, back and forth over a net. The court is like a tennis court but smaller. It’s a lot of fun and better on my knees than tennis, Maria replied.

Sounds interesting. I may have to look into it, said Bill.

Bill scanned the room and said, Okay, thanks everybody for your introductions.

Bill continued, Chris asked us to provide an overview of our products and development team structure. Jalen Standish and Maria Lopez will present it. We took Chris and Tony on a plant tour earlier, so they have some understanding of our products and manufacturing processes, but let’s go ahead and share some more detail.

Bill looked at Jalen Standish, the plant manager at the Saline plant, and said, Jalen, would you please start us off?

Certainly, Bill, said Jalen.

Jalen stood up from the table and walked to the front of the room. He picked up the remote control for the data projector and turned it on to display mode and projected his first slide.

Figure 1.1 Headlining system in a vehicle

"I pulled this picture off the Internet to show what a headlining system looks like in the vehicle.¹ This is not one of Defender’s headlining systems, but it’s similar in appearance and is a better shot than any of the photos we have. It shows all the components on the visible surface including the headlining cover fabric, the two sun visors, the lighting assemblies and assist handles. The light and assist handle for the rear, right side passenger position is not visible in the photo, but they are mirror images of the ones visible in the rear, left side passenger position. This headlining system has a sunroof opening as do many of ours."

Jalen advanced to the next slide and continued speaking.

Figure 1.2 Typical headlining system content

"This is a rough sketch of our typical headlining system. We make many different shapes, sizes, and content, which are dependent upon our auto customers’ content requirements, performance specifications, and the vehicle dimensions. The sketch on the top is looking up at the headlining from inside the vehicle. The sketch on the bottom is looking down on the back side of the headlining from the roof of the vehicle.

We attach all the content you see in the illustration to the headlining substrate and ship it to our customer’s assembly plant as a module.

Some automakers switched from receiving and installing individual components to receiving and installing one complete headlining module. They found the module approach freed up floor space in their plants and reduced internal cost."

Jalen pointed a laser pointer at the top illustration and said, The typical content of a headlining system visible to the vehicle occupants includes the headlining substrate and fabric, three or four assist handles, two sun visors, a front lighting module and some rear lighting. The sun visors may also be lighted. Occasionally, the front lighting module has additional content like a sunglass holder and switches to control the sunroof.

Jalen moved the laser to the illustration on the bottom and said, The vehicle occupants do not see this side of the headlining system. It contains retaining clips that hold the components to the headlining substrate, wiring to run electric power to the lights and sunroof, and head impact energy management material. The wiring and head impact material are attached to the substrate with glue.

Jalen advanced the slide and continued speaking.

Figure 1.3 Defender headlining system process flow diagram

"You saw the manufacturing process steps during your plant tour. On this slide, I included only the basic steps. As you may have seen, there are many activities that happen in between these steps related to handling and staging of components that are not shown here.

First, we cut the headlining fabric, stack it, and store it. In step two, we bring the fabric together with the headlining substrate material and form them in the molding press. Next, we trim the perimeter and holes for lighting, sun visors and assist handles. In step four, we clip the lights and sun visors onto the headlining. We then clip the assist handles onto the headlining. Next, we apply the hot melt glue that adheres the wiring and the head impact material to the back of the headlining. In step seven, we quickly place the wiring and the head impact material onto the glue before it hardens. Then we attach the wiring