It’s not all about cost

In this dreary economy it’s natural for companies large and small to look for every way possible to cut costs. Organizational fat gets slashed, bill of materials (BOM) costs are scoured, vendors are beat up or replaced, and off-shoring is investigated.  Products can be redesigned to save costs; designs and process can be optimized for manufacturability (shameless plug: Zebulon Solutions offers such redesign and DFx services). And at one level, as long as one is looking at holistic cost of ownership with ROI or IRR factored in and appropriately adjusted for risk, these are good steps.

But it’s not all about cost.  At the product level its also about functionality, branding, reliability, performance–really the right metric is, pardon the cliche, bang for the buck. A poorly designed, cheap product will not sell just as surely as a good, overpriced product.

The right approach is that cost should be a factor in every decision, but not the only factor.  We’re working with a company right now whose 3rd party design house choose a cheap clone of a high performance IC for their new design.  The product functions, but it’s power dissipation, a key spec for this class of product, is way above marketing’s target. It may be solvable, with enough engineering thrown at it, but that also has a cost from an ROI / IRR perspective.  Or it may be that there is indeed a trade-off here of product cost vs a performance spec, in which case management will need to make a tough, yet informed decision of how to resolve.,  Maybe cost will win, but then again maybe not.

Cost is one element, a key one, but it’s not the only element.  Just as the days of cost is no object design are long since past, the days of low cost no matter the result are also numbered.

Chuck

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