Millicents

The first thing I learned eighteen years ago, when the technology startup at which I was an senior manager was acquired by a mid-sized EMS company, was how to move the decimal place to the right in Excel.  Specifically in BOMs where component costs can be driven down to tiny fractions of cents.    For one BOM (Bill of Materials) for a big customer that I had been chasing at that time we had put resistors in at a penny each.  Never in my life have I been so wrong–SMT resistor costs in high volumes are measured in millicents–five zeros after the dollar sign.  Oops.

The second thing I learned was how to multiply the BOM cost times the annual volumes to see if it was a big number or not.  Because to get to millicents you do need big numbers.  But regardless of volumes, regardless how fat or thin the product margins are, for new designs and for cost reduction redesigns, it always pays to worry about cost.  And often this is worrying about the millicents.

Do the math: a million units a year times 100 items on the BOM times 100 millicents savings each is $100,000. Ten such products in the product line and it’s a million bucks.  Yes, a tiny fraction of the total cost, and the ROI for worrying about this needs to be weighed in.  But, as they say, a million dollars here and a million dollars there and it starts to add up.

Chuck

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