Design Engineers Play Critical Role in Reducing Product Costs
9 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.