Designing for Profitability with Cost Estimating Software

Product Design and Development

November, 2007     

Companies need to make informed decisions to identify and reduce costs throughout a product's lifecycle There is immense pressure to control costs, increase profit margins, streamline designs and understand where your costs originate. Companies need to make informed decisions to identify and reduce costs throughout a product's lifecycle. Cost-estimating software tools now enable manufacturers to lower costs by identifying what a product should cost to manufacture, thereby giving design engineers vital knowledge for obtaining the most optimal and cost-effective design.

Beginning with product design, cost-estimating software facilitates communication and collaboration across engineering and procurement functions. Many cost-estimating systems provide a flexible and common user interface with intuitive navigation and convenient access to information sources and analysis. In the design phase, estimating software can help companies analyze costs and design products from the ground up with cost control in mind. By taking a bottoms-up approach, and incorporating real-world process knowledge and manufacturing standards, estimating tools can improve the efficiency of the costing process and the accuracy of results.

Cost-estimating software allows designers to create and analyze alternative designs of a part or subassembly at any point in the product lifecycle. This allows them to see the impact of various design decisions on future product costs. The software also permits design engineers to explore options through alternative processes, materials and machinery. These options can be explored via libraries of real-world manufacturing data, which may reveal that it would make sense for a supplier who uses a specific type of machine to make the part, or perhaps the part could be manufactured in-house, or even by a different process.

Streamlining the design-to-manufacturing process cannot be over-emphasized. Discovering manufacturing "issues" early on can save months of rework and precious time to market, helping a company to potentially leapfrog the competition with a product that can be introduced faster and produced less expensively.

In an example of early design for cost analysis that proved beneficial, one company examined manufacturing costs in relation to various tolerance levels for fabricating a part. At the highest tolerance level, manufacturing the part required more operations with more expensive equipment, resulting in a part cost of $27.76. However, at the lowest tolerance level, the number of operations required was decreased, and less expensive equipment could be utilized, resulting in a manufactured part cost of $12.24. With 10,000 parts manufactured per year, the annual cost savings was $155,000 on this one part alone.