3 Important Cost Factors for Product Design

When designing a new product, it’s important to consider the cost variables that go into each phase of manufacturing. In analyzing each phase and cost factor, one can determine target sales prices and profitability but just as importantly, how much product re-design and various features cost. Design-To-Cost (DTC) analyses allow manufacturers greater insight into the individual processes, and characteristics of their products design. As part of Design-for-Manufacturing (DFM) best practices, It’s import to consider the cost of various production processes early on in the design process. The creation of over-complicated features, tight tolerances, and in-depth manufacturing requirements can result in extremely technical and expensive production processes, tooling, and fixtures.

Studies have shown that the choices an engineer makes during the design phase make up over 70% of the life cycle costs of a new product. The impact of a thorough DTC and DFM analysis pays dividends long-past prototyping and first article approval. Product Development Consulting services exist to support of manufacturing design and cost, but most importantly help ensure that your production plans are set-up for long-term profitability and success. Below are just a few important factors to consider when designing your product.

Recurring production costs

A recurring production costs is just what it sounds like—a cost that is incurred repeatedly throughout the manufacturing lifetime of a product. These production costs include things such as production labor, materials, process costs, overhead, and outside processing. Recurring costs will drive the majority of your overall program cost so practicality is important when selecting materials, suppliers, and various other production standards. Although these costs are typically not hidden, citing over-complicated requirements can lead to significant increases in cost.

InsideTheBox Tip: When you can, build re-work costs into your pricing model before committing to a sale price.

Non-recurring costs

Non-recurring costs are one-time costs that generally occur during the developmental stages of product design. These costs include research and development, prototyping, tooling, and even expedited transport or production lead times. Although it can be easy to overlook non-recurring costs because they should be infrequent, the complexity of your product design will drive the amount of non-recurring investment needed. Substantial savings can be generated over the lifecycle of the product via cost analysis of non-recurring factors and can ultimately prevent product re-design.

InsideTheBox Tip: Investigate the different types of materials and tooling that can be used before committing to a supplier. Balancing initial investment costs against the lifecycle of recurring costs can help create savings.

External product costs

External product costs include logistics, packaging, currency exchange, VAT tax, and customs. Working with logistics consulting services can help you gain a comprehensive sense of what long term costs and how to maximize efficiencies. Additionally, taking into account specified product coatings or packaging needs and their impact on logistics costs can hold significant weight in determining your final product cost.

InsideTheBox Tip: Coatings, Lubricants, and specified hardware (nuts, bolts, etc.) can significantly drive cost. Consider your mode of transit and packaging specifications before deciding as well as the impact on your product prior to selecting suppliers and coatings.

Sales costs

Sales cost help account for the cost of inventory, customization, warranties and any associated administrative or sales costs. Depending on how customizable your product is to customer demand, there can be large fluctuations in manufacturing costs or inventory requirements. Using risk mitigation tactics in your product design can help offset some end-product costs.

InsideTheBox Tip: DTC Analyses can help you identify critical to quality and critical to cost features that will ultimately constrain customization and help to create a standardized product cost.  

Bottom Line

When designing a new product, critical cost factors can often be overlooked, that can either make or break a company’s profits. Using design-to-cost and design for manufacturing strategies will help you minimize production cost and avoid product or process redesign later. Consider investing in product development consulting services to help you determine the best DTC strategy for your products.