Oil Equipment Manufacturer Adapts to Major Market Changes

Client Context

A downstream oil equipment manufacturer had long relied on an engineer-to-order product strategy, which was highly effective when crude oil prices were consistently high (e.g., $100 per barrel).

However, following the crash in oil prices from $140 per barrel in 2008 to $28 in 2016, the company faced cost pressures and lost its competitive edge due to the inherently high costs of custom-engineered products.

To remain competitive, the company engaged EFESO to implement Product Value Management (PVM) and drive cost efficiency across product families.

Key Challenges

• High production costs due to engineer-to-order strategy.
• Thousands of SKUs, increasing complexity and procurement costs.
• Need for a more cost-effective product portfolio strategy.

Approach & Key Success Factors

EFESO applied Product Value Management (PVM) to reduce costs across entire product families, rather than focusing only on individual components (as in traditional VAVE – Value Analysis/Value Engineering).

1. Configure-to-Order Strategy Development

• Designed a configured product portfolio covering 80% of the target market segment’s needs.
• Maximized the impact of Value Engineering to streamline product offerings.

2. Value Engineering Implementation

• Established Value Engineering processes, coaching, and training client teams.
• Conducted cross-functional workshops with engineering, manufacturing, and supply chain teams.

3. Cost Optimization & Supply Chain Efficiency

• Identified design, engineering, manufacturing, and procurement changes across 17 product families.

Results

$23 million

In annualized product cost savings.

29%

Average cost reduction per product family.

Improved

Manufacturing efficiency and supply chain cost optimization.