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Cost of New Product Introduction: Materials

There are multiple costs associated with new product introduction (NPI), the process of designing and producing a first article product before transitioning to high-volume delivery. Though the design of the manufacturing process is sure to be optimized throughout the duration of a project, the planning of NPI is the most consequential moment when determining part costs. While OEM engineers and a fabricator’s engineers/SMEs collaborate, these varied cost factors will be discussed at length. Cost of materials is no exception. Materials are merely one piece of a complex puzzle, but they are top-of-mind concerns for OEM design-engineers and managers. 

 

Design-engineering is hard as it is. Make it less hard by following this guide. 

Material Utilization is Pivotal

Material Utilization Is Pivotal During New Product IntroductionWhile the costs of the raw materials themselves are important, they aren’t nearly as pivotal as a metal fabricator’s ability to efficiently utilize its materials. Even if a fabricator and an OEM were to agree on more optimal materials, if the fabricator has poor material utilization, costs per product will rise dramatically. Further, if the fabricator doesn’t already have systems in place to report its material utilization, this can be an immediate red flag to the OEM. 

In order to efficiently utilize materials, fabricators must purchase inventory of the right sizes to prevent excessive scrap. Costs of the raw materials will rise upfront if they are shipped as customized sizes, but this can be offset by reducing the amount of drop remaining after production. While remnants can be stored and reused, the labor involved in processing or storing the sheet metal remnants can quickly outweigh the benefits of keeping it around for later use. The fabricator ultimately suffers if they fail to properly manage their inventory and order more than what demand requires, but the OEM should care about these efficiencies at the NPI stage. This is where the OEM cost burden is determined.

Poor Design Can Lead to Poor Material Usage

OEM design engineers should consult with a fabricatorDetermining the materials to use is one thing, but how efficiently materials are used is quite design dependent. If multiple parts are created from different sheet materials (rather than cutting a few parts from a single sheet), these inefficiencies of design will shoot up the estimated costs of production. Not all fabricators will have engineers on hand to help OEM designers determine the most efficient design, but OEM design-engineers should certainly consult with a fabricator’s engineer if that resource is available to them.

Material Usage Should Be Communicated Regularly

Metal fabricators with an integrated internal tracking system will not only be able to track the number of hours per task, but can also analyze the efficiency of material utilization. A reputable fabricator can update the OEM on material usage and show, to some extent, how well they are managing the inventory required to meet the demands of production. From this point, OEM design-engineers can take the data provided by the fabricator to optimize product design. Through regular communication, the cost-per-part can be cut simply through finding more optimal methods for using materials.

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