Keep Calm And Control Your Costs

How to take control in the product design and development process.

It’s been a very unpredictable start to 2016. In our own industry, we've experienced indecision around project start dates, a little moth-balling and at worst, streamlining of workforces.

I'm no economist and am woefully underqualified to speculate on the drivers that are generating apprehension in some industries at present. But it’s a good time to remind ourselves of the things we can control in what can be an unpredictable industry.

There are many areas to consider in reducing costs for a product, from design, manufacturing and testing to marketing the product and winning orders. We also need to think about indirect costs, such as delivering and installing equipment, and the downstream costs of product support and CLS contracts. 

Even if you cannot reduce costs at all stages, by understanding those costs you can ensure they’re factored into the product selling price and recouped to maximise your profits. 

To keep control of your costs during the product design and development process:

Critique your design

  • Remove any superfluous parts from the product that are not essential to its operation. This will not only remove the cost of the part itself, but also reduce the associated assembly time and indirect cost of purchasing and handling the part.
  • Ensure parts are designed for manufacture (DFM) - e.g. increasing cutter diameter to reduce machining time, removing unnecessary features and processes. 
  • Look for part commonality to increase volumes and achieve price break points. 
  • Consider whether the parts are designed to suit the capability of your intended supplier (there’s no point designing a part for 5 axis CNC if they do not have the machine, and need to move the part from turning/milling/fitting, with all the associated set up and handling costs). 

Reduce material cost 

  • Can a material change remove a more costly post process (alum alloy with surtec and paint vs plain stainless 316)? 
  • Are parts optimising stock billet sizes (reducing waste)?
  • Are manufacturers nesting parts to maximise the yield from the stock material? 
  • Can waste material be recouped and offset against part cost at the supplier level? 

Review the manufacturing processes 

  • Is the right manufacturing process is being used for each part? 
  • Review investment in tooling etc. to reduce Unit Part Cost (UPC) casting, moulding, forming, etc. and evaluate the break-even point against the current manufacturing methods and the level of investment required – as well as the projected payback against projected orders.
  • Review finishing processes (smooth semi-gloss paint accentuates any base material or paint defect, and anodising and plating are expensive additions). 

Assess your supply chain 

  • Review whether they are making the parts in-house. If they are sub-contracting, is it cost-effective? 
  • Are the parts placed with the manufacturer who is best-positioned to manufacture those parts cost-effectively?
  • Implement quality protocols to reduce reworks and associated management costs, and minimise delays to the build programme. 
  • Know the price break point of all parts – evaluate price break points vs. investment vs. cost/duration of holding inventory against the projected sales, to maximise economies of scales. 

Consider assembly costs

  • Ensure full inventory of parts prior to build to reduce down time (especially if cell or linear assembly techniques are adopted). 
  • Streamline the build process, set up dedicated cells and avoid unnecessary movement of parts.
  • Utilise jigs, fixtures & tooling to reduce build time and improve build consistency and quality. 
  • Communise on fixings to reduce assembly times associated with tool changes. 

Reduce overheads 

  • Review the overhead cost of each discipline. Simply holding less inventory cuts costs, but be wary: the 'just in time' method can only work with predicted production rates. 

Understand indirect costs 

  • Project/build management
  • Shipping and delivery charges
  • Consumables – adhesives etc.
  • Packaging materials and the associated cost of wrapping the product between build phases and sites
  • Order placement
  • Stock control
  • Paperwork 

Review labour costs 

  • Understand the labour cost to assemble all the piece parts, sub-assemblies and top level assemblies.
  • Capture over multiple builds to tease out hidden costs and inefficiencies. 
  • Understand the cost difference between making different volumes of product. It is more cost-effective to build higher volumes of product, so ensure your profit margin is not paying for the low volume premiums.
  • Match your labour to the required function. If you have expensive skilled labour, avoid using them on semi-skilled activities unless they are not being utilised elsewhere.
  • Try to smooth out labour demands. It may be better to operate at minimum staffing levels and pay overtime, or bring in temporary staff when there are needs in labour demands, rather than under-utilise a permanent workforce for long periods of time. If you require temporary staff or need to outsource certain functions, ensure you factor in any premium labour cost into your costs. 

Understand downstream costs

  • Product test and qualification
  • Product certification
  • Product documentation/materials
  • Continuous improvement programme
  • Product support
  • Warranty costs
  • Marketing costs
  • Resellers discounts

By following these steps, you’ll keep a closer control on cost and ensure that your project moves forward smoothly.

Whether you’re embarking on a new project, or already have one underway, we can help. CADceptual Design undertakes product design engineering in every industry sector so call us today on 0118 324 2929 to see how we can support your next project