Further thoughts by the author…

January 2002

1. 'Special interest groups' may use a cost reduction program as an avenue to enhance the product by adding features to the product - especially software features (because they are "free to the Cost of Manufacture"). However, adding features generally drives the total product cost up, not down, for a variety of reasons.
   
   The manufacturing component costs, assembly costs and testing costs may not increase (even for software changes) with enhancements, but other costs will. Some of the 'hidden costs' you will incur are:
   
   • Increased customer support, field service, and repair costs caused by new bugs.
   • Amortized costs of testing (to find and correct bugs) and validate features.
   • Cost of changes to user and installation manuals.
   • Costs for regulatory re-testing and certification, should the enhancements require this. Many times software changes effect EMI and safety!
   • Marketing costs and sales training costs for efforts to notify markets/users of the new features or to attack a new market.
   • Manufacturing overhead costs due to procurement, planning, Quality Assurance/Quality Control, training, setup, etc.
   
   As you see, when considered at the 'product level', the total cost of goods sold, and not just the cost of components, can increase… thus, you loose the Cost Reduction game.
   
   
2. At times people's egos get in the way of cost reduction - e.g.:
   • Some engineers feel that a design's elegance is very important so that an attempt to reduce the elegance for cost reasons (and I'm not speaking of product reliability here) can be stonewalled. Stonewalling often occurs because of "not enough time" or being too busy with 'neat stuff'.
   • A boss may not want to see her pet recommendation (color, material, shape, or whatever) being sacrificed to reduce cost. I've seen decisions made by bosses to 'leave it alone'; thus negating cost reductions, made on pure ego and not market reasons. Often, a boss's reaction to cost reduction is excessive cost-benefit analyses resulting in 'paralysis by analysis'.

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