Design Engineers Play Critical Role in Reducing Product Costs9 May, 2013 By: Julie Driscoll
Today's cost-management software integrates tightly with CAD to deliver real-time data about the financial impact of design changes.
As a design engineer, you are under tremendous pressure to design quality products that differentiate your company. You have requirements for form, fit, and function, and on top of that, you have a schedule to keep. Of course, your company is under tremendous pressure too, especially in this economic environment. Profit margins are tight and budgets are even tighter.
In the never-ending battle for market leadership, design engineers play a larger role than they may realize in determining a company's success. But, it's not just about which company has the best products; it's also about which company does a better job of controlling its product costs.
For manufacturing and product companies, the biggest expense on the quarterly income statement is the cost of goods sold, or COGS. Typically, the number is between 70 and 90 percent of the gross revenue your company earns. Because COGS in manufacturing is so high, a company that reduces its product costs by just one percent will see its profit rise substantially.
Design Makes a Difference
Where do you fit in? Design engineers are responsible for the largest portion of product costs: 80% of the cost of a product is created in the first 20% of development. You and your colleagues are in the best position for increasing corporate profitability if you can reduce the cost of the products your company sells. So what's stopping you? Typically, the stumbling block is understanding how much your designs will cost to produce in the first place.
When you are working in your CAD program, every change you make to a design has an impact on how much the finished product will cost. You may have a general idea how a particular change — such as material or finish — might increase or decrease cost, yet the only way to know with certainty is to have someone generate an estimate or a quote. That requires either calling in an internal cost expert or putting out a formal request to one or more suppliers. This can easily become a frustrating back-and-forth process that might take days or weeks. But with deadlines looming, who has time for that?
The entire process — from considering a design change to understanding its cost impact — is incredibly inefficient. And it's likely preventing you (and your team) from considering many design changes that could result in a lower product cost without sacrificing functionality, performance, or quality.
The solution, of course, is to understand the cost impact as you make changes to your design. Your CAD system may not support that today, but there are product cost management tools that work with your CAD system to give you real-time cost information without slowing you down.
In this example from the aPriori Product Cost Management Platform, product costs are assessed in real time based on data derived from the CAD model. Image courtesy of aPriori. Click image to enlarge.
This is especially important in those critical early days of the product development cycle. As a general rule, the higher the impact a proposed design change has on a product's cost, the more radical the change is in terms of its design. These are typically changes you would make early on in the product development cycle. Access to real-time cost assessments from the beginning enables design engineers like you to help drive significant and measureable cost out prior to production — ultimately reducing the COGS and improving the company's bottom line.
Moreover, product cost management tools that work with your CAD system enable you to understand the precise cost impact of any design change as it is being considered. With that knowledge, you can find the optimal balance among functionality, performance, quality, and cost that delivers the maximum value to your customers. You can explore more design alternatives and eliminate cost throughout the product lifecycle, resulting in fewer changes later in development when they become increasingly expensive. Most importantly, these tools can help you avoid a number of profit-killing pitfalls including missed cost targets, delayed product launches, late-stage product redesign, and post-launch cost reduction efforts.
With the right product cost management tools, your CAD system acts as the primary data source for geometric information. The tools should integrate tightly with your CAD, and evaluate geometric cost drivers directly from solid models. As a result, you don't have to wait days or weeks for cost estimates. You always know how much your design is going to cost, no matter how many changes you make. Cost updates are made instantly when you make changes to a design.
This example illustrates how the aPriori Product Cost Management Platform leverages a CAD system to update production parameters for real-time cost assessments. Image courtesy of aPriori. Click image to enlarge.
Equipped with this information, you and your colleagues can make smarter trade-off decisions in every phase of the design process while also driving out significant costs along the way. And as engineers use the system, they learn to design for cost-effectiveness from the outset — further accelerating design cycles and increasing efficiency while building cost proficiency as a core competency.
While the ultimate result of having real-time access to product costs will help your company boost its profit, that same knowledge also helps your teams meet their product cost-reduction goals. Equally important, making changes early on reduces the amount of re-work needed after a product launches. Rooting out more cost out up front means there won't be much cost left to root out on future generations. That allows your team to focus on developing new designs rather than fixing old ones.
Today's design engineers are tasked with creating high-quality, innovative products that are delivered on time. But more and more frequently, they are also asked to consider the cost of the product in order to improve the corporate bottom line. Rather than settling for small, incremental cost savings after the fact, real-time product cost management tools leverage design engineers' CAD tools to understand and affect cost savings from the get-go. These savings can be reinvested into new R&D programs and even more innovative products that increase revenue and drive up market share.
Sounds pretty good, right? And it's all possible because you knew what your design would cost to produce in the first place.
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