Design Tradeoffs That Make Financial Sense

In response to my last article, 14 Key Considerations for the Winning Design , a reader named Waqasaltaf made the following statement with regard to design considerations:

    When you lower the cost, you will have to settle for a less than ideal solution which might be negatively viewed by the customer. But for a cheap price, customer will be willing to tolerate weaknesses as well. So I guess it is about finding the right balance in all 14 considerations.

I would like to examine this statement in the light of an engineering design reality called “tradeoffs.” Is it true that lower cost necessarily means poorer quality?

A component's cost is determined by function, materials, availability, and labor. When the designer is looking for cost-cutting measures without compromising the design integrity, he has to consider the options based upon realities. Some materials may not be suitable for the desired working environments. Every function of the part is critical for operation. The cost to make the part is set by the OEM or distributor if it is an off-the-shelf component. Availability may be the deciding factor if no other part will perform the desired task. Nevertheless, there are still options on the table.

Materials that perform the same function can be very different in cost. For example, aluminum may be the lightest metal for a 1RU enclosure, but it costs more than cold rolled steel of the same dimensions. With the modeling tools available in many computer-aided design (CAD) packages, materials' responses to various stress elements can be simulated, but it will be the machine shop that will tell you the best metal for machining or sheet-metal forming for the specifics of your design. In this case, if steel can do the job, it is a cheaper option. This approach falls under the design consideration known as “Design for Manufacturing” (DFM).

It is also possible to increase the reliability and cut cost as well. The designer may have designed a circuit with a low voltage component with the same footprint as a higher voltage part already in your stockroom. There may be 10 mature products in the company that use the more highly rated part, but this designer may not have checked legacy product designs before embarking on his or her design project. The cost savings can be realized by capitalizing on the existing inventory using the higher-voltage parts while receiving the double benefits of more operating margin and more purchasing volume discounts as the part's requirements are folded into the legacy products' part purchasing volume discounts. Now with the higher reliability realized through a better operating margin, the returns department may see a lot less product returned as a result of failures due to over voltage conditions.

There are innumerable ways to cut cost without compromising the design's integrity, but it is important to remember that the cost of a product is not just what it cost to make it: The time, money, and effort to replace or repair a field return or line failure must also be factored into the company's bottom line.

Will the customer have to settle for less if the design integrity is not compromised while cutting cost? The answer is a resounding “No.” In fact, some companies have regular post-production reviews to determine how to reduce the cost of the product for the next factory build. If not for the next build, then certainly redesign for cost savings can be realized for the next generation of the released product. This is where the component engineer can really shine. Alternate part searches for a better, less expensive part are optimized when the company is not in a big hurry to hit the market with the new product. The component engineer can also review the legacy bill of materials for similar parts that could save the company money via volume discount buying as mentioned in the example above.

Never go cheaper if it makes the product less reliable, because your customers will recognize the degradation in performance or appearance and will consider both your products and company as unreliable. How many times have you had people come and use your product or services because the company they were buying from had lost its reputation as a good and reliable provider?

Materials, functions, availability, and cost may not be cast in stone. If they are not and you can use a different material like steel for aluminum, the cost is less but the weight is more. That is a tradeoff worth looking into. Paying more for a component upfront so you have fewer returns is also a tradeoff for consideration. Buying more upfront stock or increasing the component's lead time in the material requirements planning system may address the availability issue while the component engineer is looking for an alternate. That too is a tradeoff.

In none of these examples is the design integrity compromised. As a result, the customer will not have to “tolerate a weakness” in your product or reputation.

3 comments on “Design Tradeoffs That Make Financial Sense

    September 4, 2012

    I read your latest article with interest but must agree with the comments of the earlier reader.  It is generally accepted that a cheaprer product is an inferior product.  Whilst in some cases costs can be cut without compromising anything, it is not the general rule.

  2. dalexander
    September 4, 2012

    @Flyingscot, you are exactly right. It is not the general rule and so there has to be a deliberate effort called “cost reduction analysis” in place after every initial product release. It is the same players that were under pressure to hit a schedule deadline and so made the most expedient tradeoff of cost vs schedule on many incidental decisions. You have heard of the infamous triangle, cost vs speed vs quality. If you can slow down the speed you can up the other two aspects by providing more time for mor considered thought and resourcing. Maybe the wiz bang chip that cost 3X could be replaced with two chips that cost 2X in their combined cost. This is often the case with electrolytic bulk capacitors for power supply filtering. The design engineer may be able to sub up to three Al-Elec caps with one Poscap , organic polymer, saving both cost and board topography. But, as you say, generally speaking, part-for-part, dropping in a cheaper, exact same function part, can put a product quality and performance at risk. This is where the Component Engineer needs to get the FIT data for reliability and compare proposed part substitutes to the originals. The CE can make significant cost reductions at the component level on almost every design if the focus is to increase or maintain reliability without adding cost.

  3. vimalkumarp
    September 5, 2012

    yes, a value engineering analysis will make it more clear and in turn justify tradeoffs

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