In today’s highly competitive business world, product cost management is a decisive factor for market success. This is where Design-to-Cost (DtC) comes in, enabling strategic cost control from the earliest stages of product development.
How does design-to-cost work in practice?
The DtC approach intervenes in the design of new products or product generations when decisions are made that affect product costs over the entire life cycle. To set the right course from the start, the cost impact of all requirements must be known at an early stage, ideally before the actual development begins.
The DtC process comprises the following core elements:
- Target Costing: In a multi-stage process, the target costs for the product and its components are defined, and various realization concepts are weighed against each other. Both the product costs and other costs in the product life cycle are considered.
- Frontloading: A deliberately increased effort at the beginning of the development process through thorough analysis and definition of the requirements. This additional effort prevents reactive power in the future.
- Concept selection: Using a morphological box, various solution approaches are identified and evaluated in a structured manner.
- Cost controlling: Stringent cost controlling and measure tracking are used throughout the entire development process.
The advantages of this approach are evident: the fact-based bottom-up approach and the intensive examination of the product concept in the early phase ensures that all available options are taken into consideration and subsequently reduces later-stage optimization efforts, which can account for up to 40% of the total effort. Furthermore, optimized processes and reduced rework shorten the time-to-market and enhance product quality at launch. This early cost transparency means that decisions can be made based on facts rather than gut-feelings and cost efficiency can be driven forward.
Sustainability aspects as a logical extension of the design-to-cost approach
In addition to the design-to-cost approach, the Design-to-Profitable-Sustainability (DTPS) approach is becoming increasingly important. Beyond traditional optimization factors such as material and production costs and total cost of ownership, sustainability impacts are also considered.
This includes:
- CO2-Emissions
- Reputation of the company
- Value of sustainability for the respective end consumer
Typical levers for optimizing sustainability are not only the quantity and type of materials, recyclability of materials and products, and production methods, but also transport routes and the energy requirements during the use of the products. By monetizing all influencing factor criteria, optimal design decisions can be made that lead to the overall optimum cost and sustainability.
Design-to-Cost and its extension Design-to-Profitable-Sustainability are two complementary approaches that support companies in developing competitive and future-proof products. By taking cost and sustainability aspects into account at an early stage, companies can not only optimize their product costs but also meet the increasing demands for sustainable products.
Would you like to find out more about these and other approaches to product cost optimization? In our brochure “Product cost management as a driver of competitiveness” you will find detailed information on the methods and their application in practice.
In the next article we will continue our series about product cost management methods by exploring product portfolio optimization. Stay tuned!
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