7 Ways to Reduce Production Costs in Electronics Manufacturing

by | Sep 10, 2020

If you’re in the business of selling physical products, it’s critical to remember that any amount saved in your production costs goes straight to your bottom-line earnings.

However, there is no single miracle lever to pull to reduce production costs. Instead, it's the addition of several small optimizations that cumulatively make a big impact. Every detail counts and is a possible source of profit.

“Every penny saved is a penny earned”

The experts at Titoma outline 7 actionable steps and easy-to-follow action items to squeeze out the pennies from your production and see noticeable increases in your profit.
  1. Don’t procrastinate! It’s the easiest to optimize production costs at the start of the design engineering phase rather than when the product is already in production. If at the beginning spending 10 development hours can save 50% of your product cost, in the end, 10,000 hours might save you 1% (admittedly a hyperbole, but illustrative of the point).
  2. Use Off-the-Shelf components wherever possible in the product. Use mass-manufactured components and modules. They are inexpensive, reliable, and you don’t need to certify them. Don’t make a custom ball-bearing or design a custom antenna if you don’t have to.
  3. Same Function? Same Part. Try and get your BOM list to be as short as possible. If you find yourself with multiple types of screws, multiple types of resistors, or multiple types of power management chips, see if you can condense. If the function is the same, use the same part. If the function is not quite the same, see if you can make it the same.
  4. Less materials mean less expensive. Size, volume, weight, and cost are all linked. Materials can make up 60% or more of your product costs. As long as the basic features and functions remain intact, seek to swap out materials for lower-cost equivalents. It doesn’t matter if the screws inside your product are made of gold, it won’t make the product perform any better.
  5. Reduce product complexity to reduce the cost. In engineering speak, “complex” means “not affordable”. Complexity means more development time, more parts, greater manufacturing precision. This is dollars. Simple, sleek, and elegant maps to savings.
  6. Remove extraneous features. Just as perfect is the enemy of good, over-quality is the enemy of quality. Design your product to have the functions your customers want and nothing more. Any feature you can remove is a reduction in development cost and production cost. As an example, a single color LED can be up to 90% cheaper than an RGB of the same characteristics.
  7. Develop trust-based relationships with suppliers. In the world of production, you are in it together with your suppliers. You all win together. They better they know you and your business, the more helpful they may be able to be with lead times, volume pricing, Q&A and testing, etc.

As you can see there is no miracle recipe to reduce your production cost, but there is a tried and true recipe book. The most difficult part is to perform all those items without decreasing your product quality. Keep a keen eye on production unit cost as well as lead time, warranty, and reliability and you’ve got a recipe for success!

If at the beginning spending 10 development hours can save 50% of your product cost, in the end, 10000 hours will not be enough to save 1%. The expertise of your engineers will be even more crucial.

Want more ways to reduce your production costs? Read the full article.
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