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 articles explaining how hardware startups can establish a 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 Startups.

There are two top priorities when you run a 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 to you the importance of setting product records, managing documents, parts, bills 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 to use PDM/PLM tools to deconstruct product data into the right groups is essential. However, this is just the 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 a variety of supply chain scenarios.

Another aspect of cost assessment is manufacturability. The 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 those aspects of product development costs in the right way.

Finally, one of the very often missed elements of the product data record is the packaging and spare / maintenance part. Including that information in the product, and data lifecycle is essential too.

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

The anatomy of the 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 the bill of material in the right way. Most product manufactured today is not a simple collection of mechanical parts as it was decades ago.

Modern products such as smartphones, 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 section 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 parts in the bill of materials can cost you a fortune when you won’t be able to ship it to your customers.

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

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital cloud-native PDM & PLM platform that manages product data and connects manufacturers, construction companies, and their supply chain networksMy opinion can be unintentionally biased.


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