How Design, Engineering and Product Cost are Linked

Raghuraman Ramamurthy March 26, 2015

design_engineering_product_costWhen thinking about product cost from a manufacturing perspective, the first connection that many make concerns profitability, and various means to improve profit margins for products on the market.

However, there are many ways to reduce costs intrinsically that manufacturers often overlook, particularly during product design and engineering. Materials and labor during the product design stage can make up as much as 70% of total part costs (60% and 10%, respectively).

he practices and solutions you use during early stages of product development have direct effect on your later profitability. Improving these practices, and optimizing design and engineering stages, helps manufacturers lower their product cost; this allows for flexibility when setting product prices and overcoming market competitors.

Within manufacturing industries, the very way products are created has as much of an effect on cost as any other element, if not more.

Early Product Development and Implications on Cost

Productivity and material consumption during product development can essentially set the stage for cost trends later on, throughout the entire development cycle. While negotiating with vendors and tackling supply chain costs for products on the market can result in some lowered cost, the most effective way to improve cost is by optimizing the very foundations of product development.

During design, this means using alternative materials, standardized parts and improved communications to lower overall spending. The resulting, minimized spending allows manufacturing leaders to better set product prices against market competition, without sacrificing product quality.

Extraneous design elements, costly materials or labor requirements directly contribute to high product cost; simplifying the way you design products, before sending them along to engineering, results in significant cost savings down the line.

Costs During Engineering and Manufacturing

Manufacturers have just as much potential for reducing cost during floor-level engineering and production as they do during early product design. Perhaps the most overlooked but effective practices manufacturers can implement to lower engineering cost are manufacturing modularization and improved collaboration.

Modularizing engineering configurations makes it easy for manufacturers to introduce new product lines or variants, and greatly reduces defect risks. This keeps product cost low, while also developing new revenue streams companies can use to gain market value in multiple industries.

Similarly, the way your company’s engineering teams communicate between facilities and across product lines can have direct implications on your product cost. A carefully constructed, collaborative framework can help manufacturers save as much as $2 million in improved tracking and mitigated risk.

Optimizing Development to Gain Market Share

Decisions made during product design, engineering and manufacturing are all inherently linked, and contribute to a product’s ultimate cost; optimizing these stages within development is essential for gaining any sustainable advantage when products hit the market.

What are the most effective ways to do this, however? Things as simple as part count and ordering have a snowball effect on overall product cost, more so than many manufacturers realize at a glance. Small cost factors like these add up quickly, and can completely undermine a company’s profitability and market strength.

The following is a breakdown of various solutions companies can use to lower costs during design and engineering, as well as problems (cost contributors) they are best  suited to resolve:

  • Lean product development; optimized design that reduces material waste and boosts continuity, resulting in greater control over product cost
  • Value engineering; substituting expensive product parts with more affordable alternatives, and reducing the overall number of parts needed in a product
  • Standardization; making affordable or efficient parts a standard across product lines. This eliminates non-compliance risks, while contributing to engineering predictability
  • Modularization; using modular sub-systems within manufacturing to maximize returns and expand new product possibilities
  • Engineering collaboration; optimized communication between engineering teams to improve performance, tracking, predictability and consolidated efforts

When it comes to cost reduction during design and engineering, much of what should fuel your company’s objectives is based on circumstance; what exactly contributes to your product cost, and how can you use certain initiatives to reduce these contributions.

During product development, every stage is directly linked with end product cost; confronting high costs in this way is the most effective strategy to reduce costs and gain market share in competitive industries.


Topics Product Cost Optimization Product Development Solutions