Design to cost

Design to cost is an approach to product development in which the target manufacturing cost is set at the start of the project and carries the same weight as the functional and technical requirements. Every design decision (material, manufacturing process, part count, tolerances, surface finishes) is also judged by how it affects the unit cost and the required investment.

The target cost is usually derived from the market: take the price at which the product can be sold, subtract the required profit and other costs (sales, distribution, service), and the remainder is the manufacturing budget. This method is known as target costing. The budget is then split across modules and parts along the bill of materials, so every engineer knows the amount they are working with. A product with a target manufacturing cost of $50, for example, gets separate budgets for the frame, drive, electronics, covers and assembly.

Progress against the target is checked with cost models built from geometry, material and machine times (should-cost analysis), supplier quotes, teardowns of competing products and value analysis, which compares the cost of each part with the function it performs. The main levers for reducing cost are DFM and DFA, standardizing parts and buying catalog components, matching the manufacturing process to the production volume, and relaxing tolerances the function does not need.

Product cost includes not only material and part manufacturing but also mold and tooling amortization per unit, assembly, surface finishing, inspection, packaging and the cost of warranty claims. The balance between tooling investment and unit price depends on volume: for a plastic part, machining or 3D printing may be cheaper for a few hundred pieces, while for tens of thousands of pieces a mold usually pays off.

Design to cost suits products whose success depends on price: consumer products, components supplied into series production, products competing in a tender, or a new product generation that has to be cheaper than the previous one. It also applies to redesigning an existing product whose margin is no longer sufficient, where the work usually starts with a part-by-part cost breakdown of the bill of materials.

Set the target as early as possible, at the latest when writing the product requirements specification, and define the expected annual volume with it. Cost is easiest to influence in the concept phase, when the working principle, architecture and processes are chosen. Once molds are ordered, the remaining savings are small and expensive.

The most common mistake is cutting unit cost at the expense of function, reliability or serviceability. Saving a few cents on a part can come back as warranty claims or longer assembly time. Always assess total cost, including tooling, assembly and warranty, not just the price of a single part in a quote.

A target cost without an expected volume is meaningless, because the part price changes significantly with batch size. In requests for quotation, ask for prices at several quantities (for example 100, 1,000 and 10,000 pieces), tooling cost listed separately, and a breakdown into material, machine time, setup and surface finishing. Compare quotes only when their scope is the same (inspection, packaging, shipping). Update the cost estimate with every major design change, otherwise the gap to the target will only show up in series production.