Even the most basic ASIC design must undergo careful product cost evaluation. PCB designs are generally produced in bulk, and any errors made in calculating the cost of production will be multiplied further along the line.
Around 70% of a product’s design costs are realized before it goes into production, after which there is little leeway for reducing them. Post-production decisions can add a further 10 – 15%. The rest is taken up with administration, sales and marketing, product distribution, etc, which are usually part of overall company policy.
When cost reduction consultants look at how to improve company profits, generally the first thing they suggest is to reduce R & D (research and development) expenses. They will place the emphasis on sales, marketing and other post-developmental areas. However, this is tackling the problem from the wrong direction. In both electronic and mechanical engineering, the main costs are decided at the point of inception – when the initial CAD drawings are done. Effective cost reduction management takes place at the very start of the design cycle.
Experienced cost reduction analysts see two common and recurring problems with new technology, such as novel ASIC designs. The first is underestimating how quickly the product can be undermined by the competition, mistakenly believing sales figures will continue to outshine costs. The second is miscalculating production costs, causing last minute design changes, extended periods of development and added manufacturing costs. Poorly budgeted manufacturing BOMs and poor obsolescence management are other areas of concern.
We at Enventure Technologies employ experienced cost reduction analysts, and offer a comprehensive range of component engineering services including BOM cleansing and obsolescence management.