A manufacturing firm has a product that has been experiencing shrinking profits.

The firm is facing shrinking profits on a product that requires high-tech parts with strict specifications. While the contract for these parts has been renegotiated for lower costs, further actions are needed to reduce product costs and improve margins.

Conduct a quality function deployment (QFD) analysis: This helps in translating customer needs into specific engineering requirements but may not directly address cost reduction.

Issue a request for information (RFI) to other suppliers: This might identify potential new suppliers but does not guarantee cost savings or immediate improvement.

Review the part requirements and design with engineering: This is the best course of action as it can uncover opportunities to simplify the design, use alternative materials, or modify specifications to reduce costs without compromising quality.

Renegotiate pricing with the current supplier: Since the contract was recently renegotiated, further price reductions may not be feasible immediately.

Therefore, the most effective course of action is to review the part requirements and design with engineering to identify potential cost-saving opportunities.

References:

Institute for Supply Management (ISM) guidelines on cost management.

Engineering and design collaboration for cost reduction strategies.