How Product Complexity is Directly Tied to Cost

Kulasekar Sethupathy June 24, 2015

Product_ComplexityAs consumer behaviors and expectations change, so, too, must the ways that companies create and develop products. In highly competitive industries, companies use product variations, alternative product lines and new features to put their products above the rest in the eyes of consumers.

However, these attempts to gain a market presence come at their own significant costs - with greater product complexity comes greater spending per product.

The first step in dealing with and overcoming negative effects of product complexity is acknowledging that this is just the way things are, and the way things will be. New technologies, capabilities and norm consumer expectations have cemented a certain degree of product complexity in a majority of today’s industries. Consumers aren’t going to suddenly embrace technological simplicity, and forego the technologies and advances made every day.

That being said, there are some things you can do to not only limit the negative effects of product complexity on your operations, but also to use rapidly evolving manufacturing as a growth opportunity. Before we get into next steps, however, we’ll first lay some foundation with the most prevalent reasons complex product design is linked to cost.

Complex Products Call for Complex Development

It should come as no surprise that with complicated product designs and configurations comes complex development requirements. Added labor force, development stages and higher risk of product defect all contribute to inflated overall product cost. The more steps and hands that are required in manufacturing a product and putting it to market, the greater chances there are for error.

Overcoming these challenges and lowering developmental costs of complex products comes down to one major factor: lowering the defect risk that comes with complicated development, and implementing practices to improve the balance between labor and resource cost.

This is where the following practices have been able to help manufacturing companies around the globe sustain competitive market edge, despite the added risk and legwork that come with complicated product development:

  • Value engineering; essentially, replacing existing materials required in complex products with more affordable, alternative materials. Too many of today’s manufacturers work with cost-inefficient materials out of lasting agreements or comfortable operations. However, making this adjustment can do much to lower costs associated with product complexity.
  • Part standardization; standardizing certain key parts and design configurations helps companies ensure predictability on their production lines (thus, largely lowering the risk/defect costs of developing complicated products).
  • Lean product development; full buy-in into cloud-systems and automated scheduling software, throughout the development cycle, can largely mitigate risk and streamline overall development. This is valuable for companies that cannot replace certain raw materials or standardize parts to lower cost.


It All Comes Down to Materials Used

Materials and raw resources in many production environments can cost as much as 70% of a total product’s cost, especially when paired with the added labor and development required by complexity.

As for high cost materials, if they’re absolutely necessary to a complex product’s function and capabilities, moving certain key development stages outside of your organization can be a viable solution. 

Product complexity, dependent on labor and resource requirements during development, is directly linked with the overall cost of your products. However, producing complex goods doesn’t have to create strain on your budget; by adopting efficiency-focused initiatives like globalization and standardization, there is much you can do to curb the effect complicated products have on your annual spending.

Manufacturing_Excellence_Through_Lean_Initiatives

Topics Time to Market Product Development Solutions