Common Product Development Problems – We’re Constantly Struggling With Product Cost

Keeping product costs down is an important part of every company’s product development process.  But, have you ever been discouraged because you can’t get a product’s cost down to where it needs to be?  Are you frustrated that you’re constantly having to work your vendors for a better price?  Do you dread going through ‘price negotiations’ for every project?

Those frustrations are typical in the product development world.  Many project managers and engineers are forced to dedicate a significant amount of time and energy to bringing a product’s cost back into a workable range.  Many times a price goal is established early on in the product design cycle.  The designers and engineers go off and design the product.  Then the project manager, or whomever is responsible for getting the product to production, sends the required data to the vendors to obtain a price.  Finally, the price comes back, usually too high, and the price negotiations with the vendor starts and/or the product design is changed.  At a minimum, that final step takes up precious time.  But, for many individuals, it’s a frustrating and emotionally draining process. Have you considered trying a different approach?

It’s not an original or difficult approach.  It’s just an approach that isn’t often seen.  The approach involves doing two simple things:
1.    Getting the vendors involved much earlier in the process.
2.    Demanding that the designers / engineers put more emphasis on product cost.

As simple as it sounds, many companies don’t involve their vendors in the process until the design is ‘complete’.  Typically, the reason for not involving the vendor early on is because of a fear that the vendor will become too involved with the product and the company will lose negotiating power.  But, seldom does someone consider the fact that if the vendor is involved early in the process, you may not have to negotiate.  Getting the vendor involved earlier in the process gives you two distinct advantages.

First, you’ll determine what the vendor excels at up front.  Not all vendors are created equally.  They all have things that they excel at or are very efficient at and they all have things that they don’t necessarily do well or are not efficient at.  Obviously, you want to design your products in such a way that you are capitalizing on the more efficient capabilities of your vendor so that you can capture the cost efficiencies that come along with the more efficient capabilities.

Second, getting the vendor involved earlier in the product development process will allow you to get a feel for a product’s cost earlier in the process.  So, instead of having to redesign the product or negotiate the price near the end of the design process, you’ll be able to adjust the design early on.  This will not only help with getting the costs closer to where you need them, it will save time.

The second, simple thing you can do is to demand that your designers / engineers put more emphasis on product cost.  Part of this has to do with making sure your designers / engineers understand what the vendor excels at and designing the product to the vendor’s strengths.  But it also may have to do with the mindset and capabilities of the designers / engineers themselves.

Generally speaking, the designers want the product to look as ‘cool’ as possible and the engineers want the product to function like a Swiss watch.  Noble desires to be sure, but those desires don’t necessarily lead to a better / more cost effective product.  If product cost is truly an issue you’re struggling with, the desires of the designers / engineers need to be pushed down the priority list.

In addition, there simply may be a lack of experience at design / engineering level with designing a product to hit a certain price point.  This isn’t to say that the designers / engineers aren’t good at their jobs, but there is a big difference between being good at your job and designing a product to a certain price point.  I’ve seen this situation many times.  Designers / engineers are hired into a company based on many different variables and almost none of those variables are directly attributable to designing a product at as low of a cost as possible.  The solution may be as simple as discussing the goals of the project with the designers / engineers or it may take significant training.

As I mentioned at the beginning of this article, keeping product costs down is an important part of every company’s product development process.  But, if it’s taking up too much product development time, or if you’re frustrated because of the time and energy you’re having to spend on bringing a product cost down to where it needs to be, maybe you can try bringing the vendor into the process sooner.  Or, maybe you can get your designers / engineers to be more focused on the product cost.

Impulse Product Development is a team of experienced product development professionals based in Indianapolis, Indiana.  We’ve helped many clients work through the challenges that revolve around product cost including bringing the vendor into the process sooner and designing great products that are cost efficient.  If you would like to discuss the product cost challenges that you’re struggling with, please contact us today.