Product Cost Reduction
cost reduction by redesignProduct cost reduction by redesign means that a manufacturer changes one aspect of the products without changing its functionality but in a way that reduces production cost.
Most manufacturers across the world will have such cost reduction process, formally or informally:
A team looks for cost reduction ideas and corresponding expected cost improvements,
The team reviews the business case for each idea, i.e. a comparison of the estimated one shot cost of redesigning the product with the expected future savings generated by each idea.
Depending on expected volumes, each idea will pay back quickly or not. Based on this economic data, each idea will be adopted and implemented or rejected.
All companies will have two constraints in this cost reduction by redesign process:
The business case for each idea. The payback time makes each idea attractive or not.
Limited technical resources: Each company will only be able to allocate a fixed or limited budget to technical and R&D work each year.
Chinese manufacturers have a serious advantage compared to Western vendors, because the cost of Chinese technicians and engineers is much lower than in the West. A Chinese engineer will cost almost 5 times less than a Western engineer.