Our head of new product development, Andrew Amirnovin, shares 10 factors that impact your product design cost (with a focus on electronics, although not exclusively for that niche alone), how, and why. Many manufacturers are keen to reduce costs today, so taking steps to do so while your product is in the early design and development stages helps to build good financial governance into your project from the start.
Why controlling your product design cost is increasingly important in today’s economic world
We’re currently in a global economic downturn that seems to be touching almost every country from South Africa to Europe, and even China, it seems almost nowhere is safe from inflation, higher interest rates, and much higher costs than before. Consumers are tightening their belts and so too are manufacturers. As mentioned at the top of the post, focusing on controlling costs from the very start of your new product launch project is a great way to build in cost savings both to your design and finished products.
10 factors that affect product design cost
We will focus on electronic products, but you’ll see that the following 10 cost-affecting factors are relevant for many product types. There are, of course, more than ten factors that product designers can consider in order to reduce product design cost, but these are some of the major ones…
1. Component Selection.
There are risks when selecting components that are too cheap, as this usually goes hand in hand with them being poor quality, so when sourcing components you need to do a balancing act between cost and performance. Simple products may be able to perform adequately with ‘cheap’ components, but for electronics, they can spell trouble because electronic products usually need to reach a number of specific reach performance, reliability, and/or compliance requirements.
You may also consider more common ‘off-the-shelf’ components rather than rare or custom-built components. These are both likely to be lower cost and less prone to quality problems and scarcity due to supply chain disruption. In many cases, they will already have been certified, too, which provides an additional saving as they will not need to be put through testing and certification by yourself.
2. Manufacturing processes.
Complex products often require similarly complex manufacturing processes and these cost more as they need more time, manpower, energy, resources, and more. In order to reduce product design costs it may be possible to optimize your manufacturing processes with approaches like DFM (Design for Manufacturability) and ORT (Ongoing Reliability Testing). DFM is where you design the product to be easier and simpler to manufacture. This regularly results in cost savings because you’ll see benefits such as the product using fewer components, needing fewer staff to assemble due to simpler processes, using modular components instead of multiple smaller ones that need to be fastened, and so on.
ORT, or Ongoing Reliability Testing is another helpful approach. As soon as production has begun, ORT also begins. In this approach, you will take samples from batches coming off the line and put them through reliability testing (this reliability testing done is similar to that done during the development phases in the NPI process). Once the product is developed and goes into manufacturing it should have passed reliability testing, but the goal of ORT is to continually check for any issues in order to take action and prevent products in later production runs with reliability issues from making it into the field and resulting in angry customers and product returns.
3. Material Selection.
Deciding on materials is also the right occasion to be vigilant about costs, similar to components. Materials, however, include more tangible items like plastics, sheet metals, glass, etc. All of these have a cost and some manufacturers will try to avoid designing products that use more costly, scarce, or exotic materials, or those that have long lead times to procure, as these will increase costs. Product designers will need to find a balance between material cost and performance based on the product’s specifications, customer use cases, and requirements. For example, it may be possible to substitute plastic for metal if the product’s overall performance is not affected, and this will naturally be less expensive.
4. Assembly and Labor Costs.
Can the product be designed to include fewer parts and have an easier, faster assembly process? This might mean fewer fasteners, modules being used, and simpler processes being used by the product designer. If so, labor and assembly costs can be lowered accordingly and this is Design for Assembly in essence.
Fewer production operators required on the line means that staff costs are reduced and, even if operators numbers are reduced, it may be possible to improve the assembly processes and for operators to be multiple tasks at once that they can do quickly, meaning that they can do more work per person (rather than only doing one single operation, such as screwing in a screw, and then passing on the unit to the next station). As well as DfA, mistake-proofing, automation, and line-balancing can also be used to reduce the assembly and labor portion of product design cost, too.
5. Product Size and Weight.
Making a product smaller (or larger) can affect its cost, however, the product designer needs to be sure that the size and weight are suitable for the customer. A smaller product may use fewer resources and so may be less costly, for example, so designers will look out for opportunities to reduce costs in this way. This also has a knock-on effect on shipping costs, as smaller products may weigh less and take up less space, and so will be less expensive to store, pack, and ship.
6. Energy Efficiency.
Energy-efficient products are a real megatrend these days. Energy-efficient electronic products will often have less environmental impact, be cheaper to run for consumers, and comply with new sustainability legislation (such as the EU Ecodesign regulation). If products don’t fit this description they may be less popular, especially as consumers become more interested in purchasing more sustainable products and/or products that will cost them less to run. Also, if you end up bringing a product to market that has competitors that are all more energy-efficient you risk even being obsolete, never mind less desirable, so all of the time and money spent on developing and manufacturing the product may never lead to a profit. Therefore, designing for energy efficiency is wise for many electronic product manufacturers when looking at the longer-term financial prospects of the business.
7. DFM (Design for Manufacturability).
Product designers may choose to follow a DFM approach where the product is, simply, easier to manufacture. A product that can be assembled more quickly and easily will tend to cost less in materials, resources, and staff costs. Therefore, the designer will have a focus on using fewer parts, simpler assembly processes, fewer operators, easier soldering, less energy-hungry processes in the factory, better quality parts, easier testing, and so on, as all of these can affect the product cost. Because of DFM’s complexity, an experienced manager is usually appointed to control the process, set goals, and measure results.
8. Testing and Quality Assurance.
Product testing for reliability and quality is a good investment during the NPI process because it saves you money in the long term by avoiding needing to deal with the cost of poor quality or reliability. Let’s look at some of the drawbacks of a poor quality or unreliable product: lost customers, warranty claims, product returns, repair costs, etc.
Quality inspections should not be skipped during development and production because as soon as issues are found they can be fixed, reducing the risks of problems occurring when the product is in use by customers. The product designers can take feedback from quality inspectors and tweak designs in order to improve the product’s tolerances, measurements, etc. Changes to the product design earlier on are less costly than, say, if it is in production, but either way, it’s imperative not to let poor-quality products hit the market.
Electronic products can also be designed to include self-diagnostic functions that can be used by inspectors to check that finished products are in top condition before they’re shipped (ad then subsequently by the consumer to check on their device’s health over time). Problems found can give you time to stop a shipment and correct the issues, reducing the risk of costly returns and warranty claims.
Incoming QC on materials and components can help you avoid making products from sub-standard inputs, providing peace of mind that you’re set up for success rather than failure from an early stage. Outgoing QC, also, helps give you peace of mind that products coming off the line reach the desired levels of quality and reliability before they’re shipped.
9. Regulatory Compliance.
It’s amazing how many entrepreneurs and businesses bringing new products to market don’t consider regulatory compliance until it’s too late. Many electronics do have compliance requirements, for example, FCC certification for many devices that transmit RF frequencies. Designing your product to be compliant is a great way to control costs because the penalties for non-compliance can be costly. For instance, you may encounter the following issues:
- You are not permitted to import the product by market surveillance authorities, therefore the money spent on developing and manufacturing it is lost and even more money needs to be spent to adjust the design (to accommodate new design changes or components, for example), test it, and make it compliant. You may also be fined.
- Your non-compliant product makes it to market but is later found to be a risk, opening you up to expensive lawsuits or even jail time if a user is injured or property is damaged.
- You miss an important deadline to get your products on the shelves in time for, say, Christmas, because it fails compliance testing and needs to be fixed. This is even worse if your clients are waiting for the products, as you may find yourself in breach of contract with them.
Compliance testing can be quite expensive in terms of the testing costs and number of samples required (many of which are destroyed during testing), so it may make sense from a financial perspective to concentrate on designing the product to comply with just one region or country’s requirements first, for instance, your key market. Once your product starts selling you can invest some of the proceeds into compliance work for further markets and expand your markets step-by-step.
10. Product Lifecycle Costs.
When designing and developing a new product its lifecycle includes the speed with which you’re going to go through the NPI process and get to market. Up to this point, you are not earning any money from selling the product, so the faster everything is completed (properly), the better!
Some manufacturers skip steps in the NPI process in order to save on costs and time, however, this is counterproductive if you end up with a product that is returned by customers or falls foul of compliance requirements due to a lack of quality and reliability. On the other hand, a project that goes over schedule is also negative as delays increase your costs. It’s important to monitor each step closely to avoid problems that might delay your project, such as incorrect or too few materials and/or components being ordered.
Regarding time, designing the product for manufacturability and assembly, as discussed earlier, will hopefully provide a faster route to production, so the lifecycle is shortened.
Unsure about product design cost for your products?
We can help you as we’re a contract manufacturer that often helps bring new electronic and mechanical products to market. Contact us and we’ll be happy to give you our thoughts on your project and provide a quotation for our assistance if you like.
