When developing a new product, it is important to take into account the cost variables in each stage of manufacturing. Analyzing each phase and cost factor helps you determine not just target sales prices and profitability of your product, but also how much product redesign and features cost.
Consumer product design companies make use of practices such as Design-to-Cost (DTC) and Design-for-Manufacturing (DFM) to come up with insights that make product development cost cheaper but at the same time make it profitable. Therefore, it is important to consider the cost of the variables used in each of the production processes to be taken in a product creation project.
Incorporating over-complicated features, in-depth manufacturing requirements, and tight tolerances can lead to highly technical production processes, and these translate to greater costs.
According to various studies, a designer’s decisions during the development phase make up over 70% of the life cycle costs of a new product. This is why pre-planning, and taking the results of DTC and DFM studies, prove to be essential. Products developed based on these findings lead to long-term profitability.
Among the factors that make product design expensive are:
- Recurring production costs.
Recurring production costs refer to costs that are incurred from repeated tasks done during the manufacturing period of a product. These production costs include labor, materials, process costs, overhead, and as well as outside processing.
Recurring production costs are expected. This is why consumer product design companies use DFM as a strategy to manage these costs effectively. Recurring costs drive most of your program cost, so you have to be practical in choosing the materials, suppliers, equipment, technology, and other production requirements.
- Non-recurring costs.
There are also one-time costs in building a product. They usually take place during the planning stages of product design. These include market research, prototyping, and tooling.
Non-recurring costs are seen as an investment towards developing a DFM that is practical and cost-efficient. Doing a cost analysis for non-recurring tasks in your product helps generate substantial savings on product development and as well prevent product redesign.
- External product costs.
External product costs are not seen in tangible output. These include costs for logistics, packaging, taxes, currency exchange, and customs when applicable. These costs are inevitable, but you can seek the advice of logistics consultants as well as accountants and auditors who can provide you with a better understanding of external costs and how to reduce them.
- Sales costs.
Lastly, sales costs also make product design expensive. These include the costs of inventory, warranties, customization, and other associated admin expenses. Depending on how customizable your product is to customer demand, you may encounter fluctuations in manufacturing costs and inventory requirements.
DTC analyses can be used as a means to reduce the risks in blowing up sales costs. By looking at the key findings of your product’s DTC study, you can then prepare for these fluctuations and project how customers would demand for your product.
In a nutshell
Product design is not cheap. Its costs however, can be mitigated by using a well-planned design for manufacturing. Analyzing the costs of each stage of product development likewise gives you projections that are practical and reasonable, and these likewise help you determine the price of your product once it hits the market.