The initial cost of a product is in its market research and, sometimes, in proposal engineering and sales. You may or may not participate. These costs result in the decision to make the product.
Engineering
The cost of engineering is for your time, that of your managers and your assistants, and that of the computer and experimental work performed to aid you in producing a design. Engineering cost also includes the ongoing cost of your time to make modifications and solve problems as the product enters and continues in production. For the same design value, the lower the engineering cost you generate, the better the job you have done, the more money you company will make, and the more you will be appreciated and rewarded.
Manufacturing
The manufacturing cost of your product comprises labor, material, and the cost of capital for inventory and capital equipment. As a design engineer you have great power to produce a better product for less manufacturing cost, i.e., to make a more cost-efficient design.
Part of the manufacturing cost is the tooling cost. It, with your engineering cost, will be amortized over the total production run. In your mind, as you design, you must continually trade off higher tooling cost and lower part cost. For example, a die casting has higher tooling cost and lower machining cost than a hog-out, which has lower tooling cost and higher part cost. Another part of manufacturing cost is quality control, i.e., inspection. In your design thinking, bear in mind what inspection processes will be required; they may influence design decisions. Also think of the gauges and test equipment which should be used. You may be able to make a substantial contribution by suggesting and designing such inspection tools.
Marketing cost is something that engineers do not like to think about but that general managers must consider as equally important to engineering and manufacturing costs. It includes the initial market research and proposal engineering and sales mentioned above, plus the costs of salespersons, advertising, packaging, warehousing, and warranty. If you are conscious of these costs, you may be able to modify your product design to re-duce them. If you think like a marketer, you will make the product so its price can be low without sacrificing value and thereby encourage customers to buy. If you make your product more reliable, the warranty costs will be less and you will further encourage customers to buy. If you design the product to be easily and safely packaged against damage, the cost of replacing damaged goods will be less.
Overhead
Overhead is an irritating abstraction to engineers, but it is a real cost to your company over which you have some influence. Overhead includes the cost of rent, insurance, and internal services by such people as buyers, accountants, and managers. There is not very much you as a designer can do to minimize these costs, but occasionally there is an opportunity. Depending on your design choices, your purchasing department spends more or less time in buying the components and materials for your product. You will be saving your company overhead costs if you select readily obtainable standard components and materials with multiple reliable vendors and if your design minimizes the total number of vendors with whom your company must deal. To use one of the words which frequently recur in this book, it is a call on your judgment to make only minor sacrifices in the quality of your design to simplify the purchasing process.
Capital
Your company spends money (invests capital) on the product continually from the moment when it is a gleam in the eye until there is enough profit on sales to equal the capital invested plus the cost of that capital. It sounds strange to say that money costs money, but it does. If the money is borrowed, the cost is interest. If it is stockholders' money (or your own in your entrepreneurial business), it could otherwise have been loaned out at interest and the interest you are not getting amounts to a cost. Therefore anything you can do in product design or project management to spend less time and need less machinery, tooling, and inventory directly helps the company's profit on the product. With a little luck and self-advertising your success will let you share the benefit.
Transportation
The cost of transporting materials and components from their vendors to your factory is paid for by your company and is part of the cost of manufacturing. In your design decisions you have some control over weight, transportation mode and distance, and fragility of the incoming material and components and in so doing have some control over this portion of the cost of the product. Outgoing transportation is paid by your customers, but it is viewed by them as part of the price of your product. Your design has some influence on outgoing transportation cost. Total weight, fragility as packaged, and separate packaging of dangerous or sensitive materials all affect cost.
Packaging
Bear in mind, in your design, that the packaging of your product, whether a decorative perfume box or an oceangoing crate, is part of the design of the product and contributes to the cost of the product.
