Increasing profitability is a priority for any manufacturer. Whether you’re working with a Contract Manufacturer (CM) or building the product yourself, the ideal time to reduce the cost of your build is prior to production. We recommend Original Equipment Manufacturers (OEMs) use the following eight cost-reduction techniques to lower their production-related expenses.
- BOM Scrub
- Cross Over
- Design For Manufacturability (DFM)
- Stay Popular
- Monitor Alerts
- Count Your Layers
- Score It
- Utilize Surface Mounts
Your Bill of Materials (BOM) is where the greatest cost savings potential exists. BOM scrubbing is a service offered by some CMs that verifies the manufacturer’s part number and pricing, while monitoring lifecycle status. A prudent and forward-thinking CM partner should monitor lifecycle status to prevent premature and costly redesigns. Determining which parts are classified as End-of-Life (EOL), Not Recommended for Design (NRD), or obsolete will save you time and money in the design process.
According to a study done by the American Purchasing Society, 74% of engineers use the brand they are most familiar with. This means engineers can miss opportunities to utilize the best or most cost-efficient product. Brand name components are usually the most recognizable, but these could cost you as much as 30% more over competing components. Crossing parts is a common practice in the industry, and by simply asking your CM to do a BOM cost reduction analysis, which is typically free, you will be able to identify appropriate generic brands and save thousands of dollars annually.
DFM is a cost-reduction service that can be missed during the design phase. With this service, your CM will suggest ways to optimize your design for the manufacturing process. Having a DFM-verified build will produce the highest possible yields at the best possible production cost. This, usually free, service can lower your cost on every build. A 15% cost reduction over the life of your product can add up quickly!
Try to steer clear of products with too many unique component characteristics. A product like this will likely be a single source item. A single source item is exactly what it sounds like – there’s a single source, one vendor, that supplies the product. With a single source item, you’ll be reliant on one specific brand and it may require extensive redesign to replace the item. By specifying components with plenty of competitors, you’ll receive multiple second source options and force the brands to remain competitive for your business.
Some CMs and distributors provide automatic EOL alerts that notify you of changes in product lifecycles. By knowing about these lifecycle changes in advance, you can make informed decisions and pursue alternative product options. While you can monitor alerts yourself, finding a CM that provides this service will save time (and money). Depending on your production build forecast, we recommend monitoring EOL alerts every three to four months.
When possible, keep the layer count to a minimum. The more PC Board (PCB) layers you have, the higher the price for the board.
When a PCB requires routing due to its shape, you’ll see an increase in your PCB cost. If a straight outline is possible, scoring will use less board material and require less labor, thereby lowering the cost.
New designs should incorporate surface mount packaging options as opposed to through-hole mounts whenever possible. The placement costs are 30-60% lower for surface mount products and can also improve the quality of your builds by eliminating labor fatigue during production.
Applying these best practices to your manufacturing guidelines will help reduce the cost of your build, lead to higher production yields, simplify the design process, and result in a more robust product ready to go to market. For more information on lowering costs and improving your product, contact us to learn more.