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As the development progresses, the cost of the product gets more defined. Each stage has several ouputs that will determine the cost of the product.
For example Specs A and Specs B on the above chart meet the same
product requirements but Specs A will make for a more expensive product.
Similarly Design A is more expensive than Design B. Understanding how each
output of each stage affects cost will help to reduce the total cost
of the product and
meet the product requirements.
Stage by stage outputs
You may find that more, or different outputs apply to your
products. However, it is important to understand that the relevant outputs
determine the cost of your products. Understand your outputs and how to optimize
them, and you will greatly reduce your costs.
Stage 1 - Product Specifications
- Features / functions of the product
- Performances of the product
- Value of each feature / function to the customer
Stage 2 - Design
- Designs of parts
- Materials of construction
- Number of parts
- Usage of common components
- Product actual performances
Stage 3 - Sourcing
- Selected suppliers for each component
- Cost of parts, raw materials
- Sourcing strategy and economies of scale
The magnitude of cost reduction opportunities and time to implement vary between
analyses. Reworking the specs usually takes longer but leads to greater
opportunities than redesigning parts. Similarly, sourcing efforts can be
implemented faster but might not have the same magnitude as a redesign. The
chart below highlights potential results of reduced costs compared to the average time required
to implement. 
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