Increasing profitability is a priority for any manufacturer. Whether you are working with a Contract Manufacturer (CM) or building the product yourself, the best time to reduce the cost of your builds is before you ever go into production. Many smart Original Equipment Manufacturers (OEMs) use the following cost reduction techniques to lower their production related expenses.
Keep it Clean
Your Bill of Materials (BOM) is where the greatest cost savings potential exists. BOM scrubbing is a service some CMs offer that verifies the manufacturer’s part number, checks pricing, and updates you on life cycle status changes. These life cycle updates help prevent premature and costly redesigns due to parts going End-of-Life (EOL) or obsolete. BOM scrubbing can even help keep you up to date on what parts are Not Recommended for Design (NRD), which can 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.
Designed for Success
Designing for Manufacturability (DFM) is an opportunity that can be missed during the design phase. Some CMs offer these DFM services. With this service, your CM will tell you how you can optimize your design for the manufacturing process. Having a DFM verified board will ensure the highest possible yields at the best possible production cost. This, usually free, service can lower your costs on every build. A 15% cost reduction over the life of your product can really add up quickly!
Try to stay away from brands with too many unique component characteristics whenever possible. A product with many unique component characteristics will likely be a single source item. You are held captive to one brand’s product when competition is limited in this way. By specifying components with plenty of competitors, you ensure multiple second source options and force the brands to remain competitive for your business.
Some CMs and distributors offer EOL alerts that automatically notify you in advance of changes in product life cycles. By knowing about these problems in advance, you can make informed decisions and exercise your best options. While you can do this yourself, finding a CM that does this for you saves you time and money. This should be done every 3-6 months, depending on your production build forecast.
When possible, keep the layer count to a minimum. The more PC Board (PCB) layers you have, the higher the price for the PC board.
Any time a PCB requires routing due to its shape, it will increase your PCB cost. If a straight outline is possible, scoring will use less board material, require less labor, and lower the cost of your PC boards.
New designs should incorporate surface mount packaging options instead of 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.
Getting all members involved in the production process aligned and moving in the same direction is critical to cost reduction. Applying these best practices to your manufacturing guidelines will help you to achieve your organizational goals. For more information on lowering costs and improving your product, subscribe to our blog.