Cost Reductions

Rule of thumb states that product development determines 80% of a product's cost. The product concept phase alone can equate to roughly 60% of cost. When bringing a product to market, it's in executives' best interest to get things done right, or as best as they can, the first time.

Costly iterations can occur and generally tend to add up in cost quickly if/when product design changes are proposed once manufacturing ramps and volumes have increased since there is always a high likely-hood that one change may also force other changes that are now related in a product. Meanwhile, the total cost of implementing the change may also not likely be recouped over the increasingly shortening product life cycles of most products. Add to this that very few companies really know how to keep track of costs associated with product changes and one can quickly see how it pays to think ahead.

When an OEMs outsources its product design activity, OEMs are not only paying for the services the contract manufacturer offers, they are also paying for the years of experience it took the contract manufacturer to develop the services and expertise it needs to support the services it offers.

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