Commentary: March 2006

By Mitch Free, MfgQuote.com

As pressure steadily mounts for companies to more quickly produce increasingly sophisticated products, the stakes are climbing higher for design engineers. In fact, few employees have more control over a company’s profit than engineers. This is why it’s critical for engineers to go beyond designing for manufacturability and start designing for profitability.

This emerging practice is based on two premises: one, that a product’s production cost is directly related to its complexity;  and two, that high production costs erode profitability. Ergo, simplicity means higher profits.

Most every engineer has, at one time or another, been guilty of sending out an unnecessarily complex design (e.g., deep pockets to mill, tiny corner radii, holes that intersect at crazy angles, ridiculously tight tolerances for no apparent reason). Unfortunately, the engineer has no idea how much cost he or she has added to the part. But you can’t blame the design engineer too much. Far from being experts, they often have no training or experience in manufacturing.

Designing for profitability directly addresses this problem and is an evolution of designing for manufacturability. Great engineers and OEMs design for profitability whenever they can by consulting closely with manufacturing engineers, machine shop personnel, and other component suppliers from the outset of the design process. In addition to ensuring that the design is manufacturable, which should be just the first threshold in clearing a part for production, designer and supplier go further. They cooperate to cut time, cost, and complexity from the process of making a part long before the design is finalized.

The product development timeline consists of concept, design, sourcing,  and production. By the sourcing phase, the only opportunity for cutting costs is to reduce the profit margin of the project or making other equally unappealing concessions. A closer look at the concept will reveal that the earlier in the cycle, the greater the opportunity to affect the cost of the product. It follows, then, that the greatest opportunity to influence cost comes during the concept phase.

Smart manufacturers can look at an early concept and propose less costly alternatives on the fly. They can suggest different materials, machining approaches, or modifications that can dramatically simplify production. The idea is to squeeze cost out of the design. Too often, engineers attempt to drive out costs—only after the design is final—by forcing their suppliers to bid down the price of their work.

Designing for profitability holds that you can drive excess cost out of a product from the moment of product conception. A wonderful byproduct of designing for profitability is getting products to market more quickly. The easier a product is to manufacture, the more quickly it can be completed in the quantities required. And shortened time to market, of course, is another big contributor to profitability.

So, how do you put the design for profitability principle to work?

First, invite your suppliers to participate in your design development or to propose design alternatives in the quoting process. Welcome their expertise. Savvy manufacturers will provide it for free. Their advice can save you hundreds of thousands of dollars over the life of a product in reduced production and warranty costs. You can reward cooperative suppliers (and yourself) by giving them additional work and making them members of your design review board.

Second, institutionalize the design for profitability business process. New sourcing software, some of it free, as a Web service, lets design engineers and suppliers collaborate closely, online, sometimes even through their design software. Incorporate capabilities like this into your design process.

Designing for profitability can and should be a win-win for everyone involved. You bring suppliers into the inner circle, leverage their expertise, and give them more work. The savings quickly add up with a single product, over its lifecycle, and across all the products you make.

Mitch Free is the CEO of MfgQuote.com, an online marketplace for sourcing and selling custom-manufactured goods and services. Send an e-mail about this commentary by clicking here. Please reference “Commentary, March 2006” in your message.