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What is Design-to-Cost and why does it matter? By Ben Jordan Design-to-Cost should be part of your design process. With a committed team and the right tools, you can reduce product costs and improve your competitive position. As a design engineer, you know that what you do affects the cost of your products. In fact, there have been studies that show that choices made during the design phase account for 70% of the life cycle costs of a new product. To help you make these tough choices, we recommend you adopt the Design-to- Cost (DTC) process. Design-to-Cost uses real-time supply chain data to assess design choices with cost objectives in mind. It takes into account such things as manufacturing lead times, volume pricing, volume capacity, and logistics information, all while your product is still in the design phase. Using this information, you’ll not only produce great products, but you’ll help your company gain and maintain a competitive advantage. DTC addresses product costs across the entire product life cycle, including the following: Recurring production costs, including production labor, direct materials, process costs, overhead, and outside processing. Non-recurring costs, including development costs and tooling. Product costs, including recurring production costs and tooling. Product price or acquisition costs, including product costs; selling, general, and administrative costs; warranty costs and profit. Commitment cuts costs DTC isn’t a magic bullet -- it’s hard work. To do it right, you need to make it an integral part of your product development process. Part of this is making a commitment to address costs at all design reviews. Fortunately, this is easier than it was in the past because companies now have access to real-time data on each of the components in a design. By working closely with your purchasing team and with suppliers, you can have direct access to component costs and availability. One way that DTC helps keep costs down is by addressing the problem of “creeping elegance.” As “elegance” creeps into a design, engineers sometimes specify parts that are difficult to source, have a high logistics cost, or may not be available in sufficient supply. Discovering these issues early in the design cycle saves considerable engineering time and component cost. Similarly, with accurate and current cost information, you can initiate preventive action that avoids costly supply chain surprises downstream. You can quickly identify other potential supply chain issues, such as parts availability or logistics problems, in real-time. In addition, the DTC process motivates you to explore creating cost-saving alternatives while still meeting design specifications. DTC also helps prevent unwise budget cuts that may hurt profitability. Cutting design engineering budgets, for example, may cut design costs, but may also result in an inferior product design and drive up material and labor costs. Cutting costs on components may result in higher warranty costs and lower customer perceptions of the end-product. Being successful with DTC To be successful with DTC, you must establish cost as a constraint from the outset of the design process. Goals need to be sensible and achievable -- impossibly high goals will be ignored and goals that are obviously too low do not generate the commitment necessary to achieve them. Equally as important, DTC must be a team effort that includes design engineering, management, and supply chain executives. All team members must commit to cost targets, development budgets, and design timelines. And, once established, DTC needs to be continued to the end of the product’s life, since additional cost-saving opportunities will arise during the downstream production, operations, and support phases. In addition to setting achievable goals and establishing a committed team, you need tools that dynamically maintain and update supply chain data for each component in a design. Ben Jordan is senior manager of Content Marketing Strategy at Altium – www.altium.com PUBLISHER André Rousselot +32 27400053 andre.rousselot@eetimes.be Editor-in-Chief Julien Happich +33 169819476 julien.happich@eetimes.be EDITORS Christoph Hammerschmidt +49 8944450209 chammerschmidt@gmx.net Peter Clarke +44 776 786 55 93 peter.clarke@eetimes.be Paul Buckley +44 1962866460 paul@activewords.co.uk Jean-Pierre Joosting +44 7800548133 jean-pierre.joosting@eetimes.be Circulation & Finance Luc Desimpel luc.desimpel@eetimes.be Advertising Production & Reprints Lydia Gijsegom lydia.gijsegom@eetimes.be Art Manager Jean-Paul Speliers Acounting Ricardo Pinto Ferreira Regional Advertising Representatives Contact information at: http://www.electronics-eetimes.com/en/ about/sales-contacts.html ELECTRONIC ENGINEERING TIMES EUROPE is published 11 times in 2014 by European Busines Pres SA 7 Avenue Reine Astrid, 1310 La Hulpe, Belgium Tel: +32-2-740 00 50 Fax: +32-2-740 00 59 email: info@eetimes.be. www.electronics-eetimes.com VAT Registration: BE 461.357.437. Company Number: 0461357437 RPM: Nivelles. Volume 16, Issue 11 EE Times P 304128 It is is free to qualified engineers and managers involved in engineering decisions – see: http://www.electronics-eetimes.com/subscribe © 2014 E.B.P. SA All rights reserved. P 304128 european business press 50 Electronic Engineering Times Europe December 2014 www.electronics-eetimes.com


EETE DEC 2014
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