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Money — an All-Encompassing Parameter

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Psychology of Money

Psychiatrists will tell you that money, power, sex, and religion are the strongest human motives. To a considerable degree money is a form of power, and it is "the love of power [which] is the root of all evil." The highly emotional word "greed" means a thirst for money.

Cost as an Engineering Parameter



Cost, in engineering language, is a figure of merit. High cost is bad; low cost is good. Cost is a common denominator of value and is usually expressed as money, which is the common medium of exchange. Cost is what apples and oranges have in common.

At one time the term "cost-effectiveness" was used. It is more appropriate for engineers to think of "cost efficiency," defined as the ratio of the value of the product out (usually not measured in dollars) to the cost of the effort in (measured in dollars).

We should face reality and learn to be cost-efficient in our work; we should study and treat cost as an engineering quantity as we study energy and voltage and force. Many engineers think of themselves as members of a profession purer than the occupation of a businessperson. The basic business transaction of design engineers is to sell their services to their employers. The ruling principle of this ongoing transaction is that the employers pay money to the engineers to motivate them to make somewhat more money for the employers. Otherwise, why should the employers continue to pay?

Every engineer who wishes to earn a higher salary, every academic who wishes to achieve tenure and the financial security it brings, every inventor who hopes to get rich on royalties, every lawyer and doctor who accept fees, every not-for-profit organization which seeks to grow and generate power, security, and pay raises for its managers, all are motivated, at least in part, by the same desire for money. It is the same motive that drives the merchant, the manufacturer, and the speculator. You may rank your own route to this goal as morally higher than another's because money gain is not your only motivation and perhaps not your principal one. But we are all businesspersons too, and we are paid to share the business motivation of our companies. That's our fundamental job.

Which part-fabricating technology?

Have you studied all possible techniques and materials for making each part or combination of parts and the design variations which permit the use of each technique? (For example, you can design the same part to be machined, stamped, forged, die-cast, lost-wax-cast, powder-metallurgy-formed, etc.) Do you really know all the manufacturing techniques and materials which apply to your products? Have you studied vendors whose specialized techniques can reduce your costs? Learning new and unconventional manufacturing techniques and specialized vendors should be a part of your continuing self-education.

Simplify

Is the design really as simple as you can get it without loss of function? Complexity is easy; simplicity is the result of great effort. This is a universal principle in science, engineering, mathematics, art, legislation, and the design of business deals.

Law of Diminishing Returns

The law of diminishing returns says that in almost all activities a point is reached in which further input does not produce a proportional output. This applies to the training of athletes and the engineering of cost reductions. How do you know when to stop?

Designing for the Right Price Market

For many products there are high-price markets and low-price markets. You and your marketing organization may choose the portion or portions of the price spectrum for which you will design. It is common to design a line of products with many common parts and features with more or less superficial changes to convert them from one part of the spectrum to another. Note that your marketing department's price strategy may have little resemblance to your manufacturing costs.

The longer you live, the more ways you will learn for getting the most products for the least cost; there is no end to the study of cost reduction. The important message of this article is that you should be interested in cost reduction and want to do it.
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