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Traditional approaches have considered product cost an important factor in later development stages and independent of design decisions. This can result in estimated product costs that are significantly higher than target costs.
Design to Cost or DTC is a cost management principle that accounts for development, production, and service cost at the design stage. Design to Cost also aims to implement the necessary cost strategy during the development cycle of the project so that cost targets will become independent variables to guide the decision-making. It is prevalent in optimizing costs and increasing system performance.
Design to cost stages
To implement effective DTC before the production process, a strategic foundation should be established.
Defining target cost
The first stage of applying design to cost is to define an acceptable cost for the final product. This can be done by creating multiple standards or tiers for the outcome. The basic standard or lower tier would have only the essential quality and functionality.
A tier above this would have some innovation and extra features. The top tier would add even more functionality and luxury. The latter can also be considered as design to value.
Depending on the project type, any of these tiers can be used as a starting point at this stage. This is an essential part of DTC as it will help to understand the needs and scopes of the client and layout the framework for the following stages.
Cost management and cost reduction strategies
This stage is at the core of Design to Cost methodology.
The following are the different cost drivers to bear in mind in the product design phase that will influence the final product’s price.
- Design Standardization
- Use of Standard Parts
- Geographical Factors
- Packaging and Transportation
- Waste Minimization
This is the most important stage in Design to Cost as it will determine manufacturing decisions. When analyzing results it is important to evaluate if the design at hand fits the objectives or if it can be improved.
The Design to Cost process should be repeated until the design fits the objectives, surpasses them, or cannot be improved further.
Challenges in design to cost implementation
The implementation of design to cost can pose multiple challenges. Some of the most prevalent ones are:
- Job Responsibilities: One of the most prevalent challenges around product cost is uncertainty in terms of responsibility. To overcome this, design engineers should be allowed both the freedom and responsibility along with the necessary tools to implement cost management via design solutions.
- Engineering Culture: Another difficult aspect when putting design to cost into practice is the engineering culture as product engineers may not have an overview of many of the important cost drivers. To address this issue, engineers need resources to understand cost at the design stage. This can be achieved without expert resources.
- Component-Level Knowledge: To implement all of the cost management strategies listed above, the design engineering team needs to have component-level knowledge of the manufactured product.
Design to Cost is a great methodology to provide a cost model via design decisions. The key benefits of implementing this strategy come from cost reduction and savings at the beginning of the design.