No matter how impressive the demand for your product is, the best way to increase your profit margin is usually to lower the product's manufacturing costs rather than increasing the product's price. The cost of materials, assembly and test are typically the most significant expenses, directly affecting profitability. But how do you reduce manufacturing costs without impacting the quality?
The most effective strategic cost reduction starts with a thorough analysis of the product design and manufacturing process:
Minimize the part count
Substituting lower cost materials
Integrating self-aligning part to part features
Reduce repetitive processing steps
Minimize the Part Count
One of the best ways to reduce material costs for high-volume parts is to use fewer material types and group those that can be. If two adjacent parts are not moving relative to each other, can they be the same material and can they be the same part? Challenge your thinking on this. You may need to switch manufacturing processes or create a more complex tool to accomplish. It may be worth it given that you save assembly and inspection labor costs.
In a recent project, we eliminated a screw with a press-fit joint. If you make 2 million devices a month, eliminating a single screw means 2 million fewer parts in inventory, shipping, ordering, etc. So on this cost reduction project, we eliminated the screw, optimized the button integration and battery design.
Another example is to use a conductive coating to replace metal shielding. Since a typical circuit board has a specific EMI and RFI shielding requirements, shielding needs to be managed to given FCC compliance and protection from other signal integrity issues.
We often look at several ways to provide the shielding, including metal enclosures, plating, coatings and isolated shielding metal cans. Depending on the material, assembly and test requirements, the most cost-effective can vary. Factors to consider are volume, manufacturing location, technology, processing steps, masking for non-coated areas, and labor costs.
For eliminating unnecessary parts, common areas are fasteners, shielding, buttons, LED mountings, cables, and wiring. In addition, we optimize the design for the minimum part count.
Substitute lower cost materials
Products can usually be manufactured utilizing a variety of different materials, depending on the requirements. However, when considering a change in the materials used in your products, be sure to recognize all factors involved. Different materials may require changing your manufacturing process by increasing cycle times and labor costs. Sometimes changing the product may be worthwhile, even when the material costs are higher due to a simplified production process. The other are of interest here is performance. If there any mechanical or environmental extremes, then a full study of the change impacts should be done. Skipping this step can render a product less functional and increase warranty costs.
Leverage Modular Design
A modular design may be a cost-effective method for product customization and flexibility in design. These modules can be independently created, modified, replaced, or exchanged with other modules or between different systems.
One example of this is a MotionLoft project we did. It is an IoT device that counts pedestrians and traffic. We wrote about it earlier on our blog because it was such a challenging thermal management project. But it also leveraged a modular design to accommodate all the mounting configurations that were needed. It could be mounted on a building (inside or out), doors, telephone poles, streetlights, poles, walls, or ceilings. The modular brackets allowed for cost-effective customization and flexibility.
It should be noted that modularity comes at a price. Often more parts and interfaces are needed. It is also more difficult to develop. On the upside, leveraging modular elements across many designs/assemblies can be a great cost advantage.
Another example is a PG&E handheld device for sniffing out dangerous toxic gases. It supports modular sensor packs for easy swapping of different sensing modes. It leverages common wireless logic, alarm, and control parts so that users can plug in the needed sensor pack (one CPU and battery for many sensor solutions).
Reduce Repetitive Processing Steps
Reducing processing steps and time can lead to a significant cost saving. This can range from eliminating assembly or testing steps to using specialized tooling to assemble more products faster. Super high volume production operations can run continuously with automation (at a high NRE cost). Lower volume production operations can leverage gang type fixturing where multiple assemblies are done at the same time. We have designed and built systems in both worlds and had to weigh the trade offs in set up cost and throughput related cost savings.
Semi-automation is another opportunity for cost savings. For example, manufacturing optical equipment usually relies on a significant amount of hand assembly. However, with custom optic tooling, the alignment of the optical components can be done quickly and efficiently, saving time and money.
Consider what level of tooling supports your product volume.
Fusion Design Offers a Strategic Approach for Cost Reduction
Making your product less expensive requires a strategic approach that looks at design, manufacturing, assembly, and test. The cost of your materials, assembly and test aspects is probably your most significant expenses, directly affecting profitability. We can reduce these costs without impacting the quality of your final product or altering what your customers have come to expect and rely on.
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