Hardware Startup – the importance of product records to estimate cost

Hardware Startup – the importance of product records to estimate cost


I started a series of article explaining how hardware startup can establish product lifecycle management strategy and why it can be beneficial already early in their product development cycle. You can catch up on these blog posts here – PLM 101: Product Lifecycle for Hardware Startups and 5 Elements of PLM for Hardware Startup.

There are two top priorities when you run manufacturing company of any size: quality and cost.

Today I want to focus on product cost and how it is related to product lifecycle records. While I explained you about importance of setting product records, managing documents, parts, bill of materials and change tracking, I didn’t manage the last important thing ­ product cost. Everything starts and ends with product cost. If you cannot predict and manage it, the odds are your product will go bankrupt even before you manufacture it.

How to get cost assessment done

Establishing methods and tools to manage product records is your way to get cost assessment under control. It is well known fact that 70­-90% of product cost is influenced by 20-­30% of parts. So, the ability use PDM/PLM tool to deconstruct product data into right groups is essential. However, this is just a beginning of managing your product lifecycle.

Components you are buying from suppliers are representing only part of your product cost assessment. You should take into account discounts at volume and other aspects of cost management in variety of supply chain scenarios.

Another aspect of cost assessment is manufacturability. Cost of manufacturing tools, assembly process, quality and testing processes are all elements in your product cost assessment. Good data management and PLM tools can help you to manage that aspects of product development cost in a right way.

Finally, one of the very often missed element of product data record is packaging and spare / maintenance part. To include that information into product data lifecycle is essential too.

Net­-net, to have an ability to manage a full structure of information influencing product cost is a very important even during early stages of product development and transfer to manufacturing.

The anatomy of bill of material breakdown

Bill of Material is an essential part of product record and lifecycle. Therefore, it is important to manage a diversity of information coming to bill of material in the right way. Most of product manufactured today are not simple collection of mechanical parts as it was decades ago.

Modern products such as smart phones, electronic gadgets and other small devices are combined of mechanical parts, plastics, PCBs and software.

The diversity of multidisciplinary data creates a high level of data management complexity. In case you are managing product data using spreadsheets, you need to establish an appropriate sections for different BOM elements. PDM / PLM tools can help you to establish product data records in a better way and manage change processes.

In addition to managing parts, it is essential to include absolutely EVERYTHING you can think about influencing your product cost. It is packaging, service components, transportation services, etc. Missed part in bill of materials can cost you a fortune, when your won’t be able to ship it to your customers.

What is my conclusion? To establish product lifecycle foundation including product record and related data management functions early in product design and prototyping phase is very important. It can help to set up basic data records and make product cost assessment early in the process. Overall, it will increase changes to meet projected product cost and delivery dates. Hardware developers should consider using data management tools to perform structuring of product components and assemblies. Solid data foundation can also help establishing product database to manage full lifecycle of the product ­ prototype, contract manufacturing, RFQ and later on quality processes. Just my thoughts…

Best, Oleg


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