Reducing system cost beyond the BOM

A design change can increase the bill of materials (BOM) and reduce the cost of building the finished product. A higher-priced component may remove connections, shorten assembly, simplify testing, or reduce rework. Evaluate the change at the level of a completed, tested unit.

Define the cost boundary

• BOM cost: components and materials required for one unit at the specified purchasing volume.
• Manufacturing cost per accepted unit: material consumed, assembly, testing, and rework costs allocated across units that pass the agreed acceptance criteria. Scrapped units consume cost without adding to the accepted-unit count.
• Post-assembly lifecycle cost: failures, warranty claims, repair, and service over a defined period. Report these costs separately from manufacturing cost.

For a production lot, divide total material and conversion costs by the number of accepted units. Include the resources spent on failed units and additional rework or retest. If scrapped material is already included in material consumed, adding its purchase cost again as a separate scrap charge would double-count it. State which overhead and equipment costs are included.

A higher BOM can produce a lower unit cost

Consider a hypothetical redesign that increases component cost but removes a manual connection step. All figures below are illustrative US dollars per accepted unit, not customer results. Assume no scrapped units: all units ultimately pass. Rework and retest costs are additional to standard assembly and testing.

The BOM rises by $1.00. Assembly, test, and rework costs fall by $2.00. The net manufacturing saving is $1.00 per accepted unit. This calculation makes no claim about warranty or service savings.

Review the schematic alongside the build process

Start with one expensive or difficult assembly operation. Review the relevant schematic, interconnects, work instructions, test procedure, and defect records together. Identify what makes the step costly: handling, alignment, connection access, inspection, calibration, or repeated corrections.

Then ask which design choices create those operations. Consolidating discrete functions or redesigning an interface may eliminate work that a component substitution leaves intact. Check electrical behavior, test access, fault isolation, thermal constraints, and repairability before treating consolidation as an improvement.

Measure on a consistent basis

Compare both designs at the same volume, purchasing assumptions, labor rates, and acceptance criteria. Record the evidence and uncertainty behind each input:

• Quoted material costs, quantity breaks, and expected consumption.
• Assembly operations and measured time per operation, including handling.
• Test time, fixture requirements, calibration, and retest frequency.
• First-pass yield, final accepted yield, scrap, and rework by failure mode.
• One-time engineering, tooling, and qualification costs required for the change.

Keep first-pass yield separate from final yield: a unit recovered through rework is accepted, but it consumes additional time and resources. Do not divide costs already allocated per accepted unit by yield a second time.

Convert time to money using a stated rate. A shorter operation can free capacity without reducing payroll or equipment spending. Distinguish reduced resource consumption from cash savings that the production plan can actually realize.

Include the cost of making the change

Report recurring savings per accepted unit alongside one-time costs. In the hypothetical example, $20,000 of engineering, tooling, and qualification expense would require 20,000 accepted units at $1.00 saving each to recover that expense. This simple break-even calculation excludes financing, schedule delays, and changes in volume or pricing.

Validate reliability and label the evidence

The proposed design must meet the same functional and reliability requirements. Define the relevant qualification tests and failure criteria before the pilot. Fewer connections or parts can change failure modes; a lower part count alone does not establish improved reliability.

Label cost results as estimated, pilot-measured, or production-validated. Keep warranty and service projections separate, with a stated observation period and supporting failure data. A short manufacturing pilot does not establish long-term field reliability.

A useful review ends with a proposed design change, its cost model, the assumptions still open, and a validation plan. The decision rests on net savings per completed, tested unit while meeting the product’s requirements.