Design for Cost

Design for Cost: A Comprehensive Guide for Six Sigma Black Belt DFSS

Understanding Design for Cost (DFC)

Design for Cost is a critical methodology within Design for Six Sigma (DFSS) that focuses on optimizing product design to achieve target cost objectives while maintaining quality, functionality, and performance standards. It ensures that products are designed with cost efficiency in mind from the earliest stages of development.

Why Design for Cost is Important

Design for Cost plays a vital role in modern manufacturing and product development for several reasons:

• Competitive Advantage: Companies that master DFC can offer products at competitive prices while maintaining healthy profit margins, giving them a significant market advantage.
• Early Cost Prevention: Addressing cost during the design phase is exponentially cheaper than trying to reduce costs during production or after launch.
• Value Optimization: DFC ensures that every design element contributes to customer value, eliminating unnecessary expense and waste.
• Risk Mitigation: By designing for cost from inception, organizations reduce the risk of budget overruns and production delays.
• Sustainability: Cost-efficient designs often lead to reduced material usage and waste, contributing to environmental sustainability.
• Customer Satisfaction: Lower costs can translate to lower prices, increased market penetration, and higher customer satisfaction.

What is Design for Cost?

Design for Cost is a systematic approach to engineering and manufacturing that integrates cost considerations into every phase of product design and development. It differs from traditional cost reduction methods that attempt to cut costs after design completion.

Key Characteristics of DFC:

• Proactive Approach: DFC is proactive rather than reactive, addressing cost during design conception rather than post-production.
• Cross-functional Collaboration: Involves engineers, designers, procurement specialists, manufacturing experts, and finance teams working together from day one.
• Target Costing: Establishes target costs early in development based on market requirements and profit objectives.
• Structured Methodology: Uses systematic tools and techniques to analyze and optimize costs throughout the design process.
• Balance: Seeks to balance cost reduction with quality, functionality, and customer value.

How Design for Cost Works

1. Define Target Cost

The process begins by establishing the allowable cost for the product. This target cost is calculated by subtracting desired profit margin from the expected market price:

Target Cost = Expected Market Price - Desired Profit Margin

This becomes the financial constraint that drives all subsequent design decisions.

2. Conduct Cost Analysis

Perform detailed cost breakdown analysis to identify:

• Material costs
• Labor and manufacturing costs
• Overhead allocation
• Logistics and distribution costs
• Quality and warranty costs
• Research and development (R&D) allocation

3. Identify High-Cost Elements

Use Pareto analysis (80/20 rule) to identify which components or processes consume the majority of costs. Focus improvement efforts on these high-impact areas.

4. Design Simplification

Reduce complexity by:

• Minimizing the number of components
• Standardizing parts across product lines
• Eliminating non-essential features
• Using common materials and processes
• Redesigning assemblies for easier manufacturing

5. Material Optimization

Review material choices to find cost-effective alternatives:

• Substitute expensive materials with equally functional, lower-cost alternatives
• Negotiate bulk purchasing agreements
• Consider materials with better manufacturing properties that reduce processing time
• Evaluate recycled or composite materials

6. Manufacturing Process Optimization

Redesign products to be easier and cheaper to manufacture:

• Reduce machining and finishing operations
• Design for automated assembly
• Minimize waste in cutting and forming processes
• Consider alternative manufacturing methods (casting vs. machining, injection molding vs. traditional manufacturing)

7. Supply Chain Optimization

Work with suppliers to reduce costs:

• Source components from cost-effective suppliers
• Consolidate supplier base to leverage volume discounts
• Implement just-in-time (JIT) delivery to reduce inventory holding costs
• Collaborate with suppliers on design improvements that reduce their costs

8. Value Engineering

Systematically analyze each design element to determine:

• Does it add customer value? If not, eliminate it.
• Is there a less expensive way to achieve the same function? If yes, implement it.
• Can we combine functions? Multi-purpose components reduce overall part count.

9. Design for Manufacturability (DFM)

Collaborate with manufacturing to ensure:

• Designs can be efficiently produced with existing equipment and capabilities
• Tolerances are realistic and achievable without excessive cost
• Assembly sequences are optimized for speed and efficiency
• Setup times and changeovers are minimized

10. Continuous Monitoring and Refinement

Throughout development:

• Track actual costs against targets
• Identify and address variances quickly
• Conduct design reviews focusing on cost implications
• Implement changes before design freezes

Design for Cost Tools and Techniques

1. Target Costing

Works backward from market price to establish cost constraints for the design team, ensuring profitability from the start.

2. Value Engineering (VE)

Systematically examines every component and process to ensure it delivers necessary value at minimum cost.

3. Tear-Down Analysis (Competitive Benchmarking)

Disassembles competitor products to analyze their design choices, material selections, and manufacturing approaches, identifying cost-saving opportunities.

4. Design for Assembly (DFA)

Simplifies product architecture to reduce assembly time, labor costs, and error rates.

5. Design for Manufacturing (DFM)

Optimizes designs for efficient production, reducing material waste and manufacturing time.

6. Parametric Cost Modeling

Uses historical data and statistical relationships to estimate costs based on design parameters, enabling quick cost-benefit analysis of design alternatives.

7. Pareto Analysis

Identifies the vital few cost drivers that account for the majority of product cost, focusing resources on highest-impact improvements.

8. Cost Reduction Matrix

Systematically evaluates cost reduction opportunities against criteria such as feasibility, risk, and time-to-implement.

9. Supplier Cost Analysis

Works with suppliers to understand their cost structures and identify opportunities for mutual cost reduction.

10. Life Cycle Cost Analysis (LCCA)

Considers the total cost of ownership including purchase price, maintenance, operation, and disposal, ensuring DFC decisions optimize long-term value.

Design for Cost in Practice: Step-by-Step Process

Phase 1: Initiation

• Define project scope and cost reduction targets
• Establish cross-functional team
• Gather market intelligence and competitive data
• Set target cost and profit objectives

Phase 2: Analysis

• Conduct detailed cost breakdown of current or reference design
• Perform Pareto analysis to identify cost drivers
• Analyze competitor designs (tear-down)
• Engage suppliers for cost benchmarking

Phase 3: Ideation

• Generate design alternatives to meet cost targets
• Conduct value engineering workshops
• Evaluate material and process substitutions
• Develop manufacturing process alternatives

Phase 4: Evaluation

• Estimate costs for each design alternative
• Assess quality and functionality implications
• Evaluate manufacturing feasibility
• Perform risk analysis

Phase 5: Optimization

• Select preferred design approach
• Refine design details to meet cost targets
• Finalize supplier selections and negotiations
• Validate manufacturing processes

Phase 6: Verification

• Conduct pilot production runs
• Verify actual costs match projections
• Address any cost overruns through design adjustments
• Prepare for full-scale production

Common Design for Cost Mistakes to Avoid

• Starting Too Late: Initiating DFC after design freeze severely limits cost reduction opportunities.
• Over-Simplification: Cutting costs at the expense of quality, functionality, or customer satisfaction leads to long-term problems.
• Ignoring Supplier Input: Suppliers often have valuable insights on cost-effective manufacturing approaches.
• Neglecting Life Cycle Costs: Focusing only on manufacturing cost while ignoring maintenance and disposal costs can be counterproductive.
• Insufficient Cross-Functional Collaboration: Cost reduction decisions made in silos often create problems in other areas.
• Unrealistic Cost Targets: Setting impossible targets leads to poor decisions and design compromises.

Exam Tips: Answering Questions on Design for Cost

Tip 1: Understand the Fundamental Philosophy

Remember that Design for Cost is about proactive cost management during design, not reactive cost cutting after production starts. Exam questions often test whether you understand this distinction. When answering, emphasize early involvement, cross-functional teams, and systematic approaches.

Tip 2: Know the Sequence and Timing

Be clear about when DFC activities occur. Target costing and cost analysis happen early in design. Value engineering and optimization occur during design development. Verification happens before production launch. Questions may test your understanding of proper sequence.

Tip 3: Distinguish Between DFC and Other Methodologies

Exam questions may ask you to differentiate DFC from:

• Design for Manufacturing (DFM): DFM focuses on manufacturability; DFC focuses on cost efficiency
• Design for Assembly (DFA): DFA focuses on assembly simplicity; DFC encompasses the entire cost structure
• Cost Reduction: Traditional cost reduction is reactive; DFC is proactive and design-integrated

Clearly articulate these differences when relevant to the question.

Tip 4: Master Target Costing Calculations

Exam questions frequently include calculations. Know the formula:

Target Cost = Market Price - Desired Profit Margin

Be prepared to work with variations where you might need to solve for market price or profit margin. Practice problems involving:

• Calculating target costs from market prices
• Determining allowable costs for components
• Assessing whether a design meets cost targets

Tip 5: Use Real-World Examples

When answering essay or scenario-based questions, reference practical examples such as:

• Simplifying product design to reduce components
• Substituting materials (e.g., plastic for metal)
• Changing manufacturing processes (e.g., injection molding instead of machining)
• Standardizing parts across product lines
• Optimizing supply chain logistics

This demonstrates practical understanding beyond theoretical knowledge.

Tip 6: Know Key Tools by Name and Application

Be familiar with and able to describe:

• Target Costing: Sets cost constraints; works backward from market price
• Value Engineering: Systematically reviews components; eliminates non-value-adding features
• Tear-Down Analysis: Analyzes competitor designs for cost insights
• DFA/DFM: Simplifies design for assembly and manufacturing efficiency
• Pareto Analysis: Identifies high-cost drivers (80/20 rule)
• Parametric Cost Modeling: Estimates costs based on design parameters

When a question asks about tools, mention the specific tool name and explain how it applies to the situation.

Tip 7: Emphasize Cross-Functional Collaboration

DFC questions often test whether you understand the importance of teamwork. Always mention involvement of:

• Design and engineering teams
• Manufacturing and operations personnel
• Supply chain and procurement specialists
• Finance and accounting functions
• Quality and customer service representatives

Show that you understand cost reduction is not engineering's responsibility alone.

Tip 8: Connect DFC to Business Objectives

Link your answers to business outcomes such as:

• Market competitiveness and pricing
• Profit margin optimization
• Market share expansion
• Customer value and satisfaction
• Return on investment (ROI)

This demonstrates strategic thinking beyond pure technical knowledge.

Tip 9: Address Risk and Trade-Offs

Show sophistication by acknowledging that cost reduction must be balanced against:

• Product quality and reliability
• Customer functionality requirements
• Brand positioning
• Regulatory compliance
• Safety and liability considerations

Avoid presenting one-dimensional answers that ignore these important factors.

Tip 10: Practice Scenario Analysis Questions

Exam scenarios often present situations like:

"A company wants to reduce production costs by 30% while maintaining current quality levels. Which Design for Cost approach would be most appropriate and why?"

For such questions:

• First, analyze what the scenario is really asking
• Identify the constraints (quality must be maintained)
• Recommend appropriate tools (likely value engineering and DFM)
• Explain the logic behind your recommendation
• Discuss implementation sequence
• Address potential risks or challenges

Tip 11: Remember the 80/20 Rule Application

Pareto analysis frequently appears on exams. Be ready to explain:

• Roughly 80% of cost is driven by 20% of components or processes
• Focus improvement efforts on the vital few, not the trivial many
• Use Pareto charts to identify and prioritize cost drivers

Tip 12: Be Specific About Timing Issues

Exam questions may test whether you know when to intervene. Understand that:

• Concept Phase: Highest leverage for cost reduction (up to 80%)
• Design Phase: Significant cost reduction still possible (40-60%)
• Development Phase: Moderate opportunities (20-40%)
• Production Phase: Limited opportunities (5-10%)

Use these ranges when discussing optimal timing for interventions.

Tip 13: Study Life Cycle Cost (LCC)

Some exams require understanding that total cost includes:

• Acquisition cost (purchase price, setup)
• Operating cost (energy, maintenance, labor)
• Support cost (spare parts, training, technical support)
• Disposal/End-of-Life cost (recycling, environmental remediation)

Show you understand optimizing one phase might increase another phase's cost, but reduce total LCC.

Tip 14: Prepare for Comparison Questions

Be ready to compare DFC with:

• Traditional Cost Reduction: Reactive vs. proactive
• Continuous Improvement: Design-phase vs. operations-phase focus
• Lean Manufacturing: Design-level vs. production-level waste elimination

Tip 15: Practice Calculation Problems

Prepare for problems such as:

• Calculating component-level target costs from product-level targets
• Determining cost reductions achieved by specific design changes
• Analyzing cost trade-offs between alternatives
• Computing cost impact of material substitutions or process changes

Work through several practice problems to build confidence and speed.

Sample Exam Questions and Approaches

Question 1: Definition and Philosophy

"What is the primary difference between Design for Cost and traditional cost reduction approaches?"

Strong Answer Structure:

• Define DFC as proactive design-phase cost management
• Contrast with traditional cost reduction as reactive post-design cost cutting
• Explain DFC involves cost targets and constraints from inception
• Note that DFC enables greater cost reduction potential (80% possible vs. 10% reactive)
• Mention cross-functional involvement in DFC

Question 2: Application Scenario

"A Black Belt team is asked to reduce manufacturing costs for an electronic device by 25% for next year's model. The current cost is $100 per unit. Describe the Design for Cost approach you would recommend."

Strong Answer Structure:

• Calculate target cost ($75 per unit)
• Establish cross-functional team (engineering, manufacturing, supply chain, finance)
• Conduct detailed cost breakdown analysis
• Use Pareto analysis to identify high-cost components
• Conduct tear-down analysis of competitor products
• Generate design alternatives using value engineering
• Evaluate material and process substitutions
• Apply DFM and DFA principles
• Verify costs meet targets through pilot production

Question 3: Tool Selection

"Which Design for Cost tool would be most useful for identifying which 20% of components account for 80% of production cost?"

Strong Answer: Pareto Analysis (or Pareto chart). Explain that this tool sorts components by cost contribution, enabling focus on high-impact elements.

Final Exam Preparation Tips

• Create a Concept Map: Draw connections between DFC, DFM, DFA, value engineering, and target costing
• Memorize Key Formulas: Target Cost = Market Price - Profit Margin
• Develop a Process Checklist: Create a step-by-step DFC implementation checklist to reference during exam
• Practice Calculations: Work through 10-15 cost calculation problems to build speed and accuracy
• Study Case Studies: Review real-world examples of successful and unsuccessful DFC implementations
• Review Six Sigma Integration: Understand how DFC fits within the broader DFSS methodology and Six Sigma philosophy
• Master Terminology: Create flashcards for key terms: target costing, value engineering, DFM, DFA, tear-down analysis, LCC, parametric modeling
• Practice Writing: Answer essay questions in timed conditions to build communication skills

Conclusion

Design for Cost is a strategic, systematic approach to integrating cost considerations into product design from inception. By understanding its philosophy, tools, techniques, and applications, you'll be well-prepared to excel on your Black Belt exam and implement DFC successfully in real-world projects. Remember that DFC is fundamentally about balancing cost efficiency with quality and value, and that proactive design-phase intervention provides the greatest leverage for cost reduction.