Designing to Meet a Target BOM Price and PCB Cost Estimate

 

Introduction

Product cost management is a critical discipline in new product introduction (NPI). Setting target costs for the bill of materials (BOM) and printed circuit board (PCB) layouts and then designing to meet those targets can make or break profit margins. However, balancing cost goals with other design considerations like performance, quality, and schedule can be highly challenging. This article will explore best practices that engineers and cross-functional teams can follow to effectively design products to predefined BOM and PCB cost estimates.

Setting Realistic Target Costs

The first step is developing realistic target costs for the BOM and PCB designs:

• Leverage historical data - Analyze costs of similar past products to inform targets for new designs. Account for any differences in requirements.
• Research component pricing - Meet with suppliers to gather accurate pricing on expected BOM components, especially for new or customized parts.
• Model manufacturing costs - Work with operations teams to estimate costs for proposed PCB fabrication, assembly, and test processes.
• Include appropriate margins - Add suitable margins to preliminary estimates to provide cost flexibility during design iterations.
• Secure buy-in - Review targets with management and secure formal sign-off before design kickoff.

Design Best Practices to Meet Target BOM Cost

BOM cost optimization is highly dependent on the component choices and sourcing approach. Here are key design strategies to manage BOM cost:

Simplify the Architecture

Look for opportunities to simplify circuit architectures and reduce component counts without compromising functionality or quality.

Standardize Components

Maximize use of standard, off-the-shelf commoditized components instead of specialized parts. Reuse proven components from prior designs.

Specify Lower-Cost Alternatives

For every component, look for lower-cost drop-in compatible devices or grades to substitute without redesign.

Consolidate Functions

Specify multifunctional components that consolidate capabilities over multiple discrete parts.

Design for Higher Volume Production

Select components that offer reduced pricing at higher production volumes even if current volumes are low.

Utilize Second-Sources

Source commodity components from two suppliers to foster price competition.

Increase Modularity

Design modular sub-assemblies that can be mass produced across product families to gain economies of scale.

Design for Manufacturability

Avoid custom parts and opt for standard packages that maximize manufacturing and assembly efficiency.

Negotiate Supplier Pricing

Leverage projected order volumes and long-term roadmaps in negotiations to reduce per unit pricing.

PCB Design Strategies for Cost Management

Careful PCB design is required to meet target cost estimates while upholding manufacturability and reliability:

Simplify Layer Count

Reduce layer count as much as possible through efficient layouts and component placement to avoid unnecessary vias.

Standardize on Common Sizes

Select standard PCB sizes and thicknesses that match proven fabrication processes instead of custom dimensions.

Utilize Least Expensive Materials

Choose commonly available base materials like FR-4 instead of more exotic substrates unless absolutely required.

Increase Panel Utilization

Optimize board sizes and layouts to maximize the number of boards per panel to reduce waste.

Avoid Unsupported Features

Eliminate any unneeded gold plating, blind/buried vias, and other premium features that add cost.

Reduce Depanelization Complexity

Design panel breakout tabs and fiducials for efficient, low-scrap depanelization.

Conformal Coat Judiciously

Only specify critical areas for conformal coating instead of the entire board if possible.

Validate Test Requirements

Scrutinize any requirements for customized functional test coverage to prevent over-testing.

Model Finished Assembly Cost

Work with CM to estimate accurate assembly pricing for factors like placement, reflow, inspection, and rework.

Navigating Design Tradeoffs

Designing to fixed BOM and PCB cost targets inevitably involves balancing tradeoffs around other factors:

Performance

Using lower-cost commodity components could require compromising processing power, speed, or accuracy.

Quality and Reliability

Steps to reduce cost like substituting components, reducing test coverage, or eliminating redundancies impact robustness.

Schedule

Meeting aggressive market windows could necessitate sticking with trusted components over unproven lower-cost alternatives.

IP Protection

Component standardization aids cost optimization but makes reverse engineering easier. Unique parts provide obfuscation.

Inventory

Standardizing BOMs across product families reduces inventory but limits configuration flexibility.

Manufacturability

Simpler PCB designs trim cost but can hinder dense, optimized placements and trace routing.

Cross-functional tradeoff analysis and alignment is essential before design freeze to avoid sub-optimal outcomes.

Executing Design-to-Cost Best Practices

To ingrain target cost management into NPI, certain organizational enablers are required:

Cost Engineering Expertise

Having specialized cost engineers collaborate with design teams is invaluable for meeting cost targets.

Design-for-Cost Tools

Using DFx software that provides real-time cost modeling and optimization helps make cost visible and actionable.

Supplier Integration

Early involvement of suppliers in design reviews and cost modeling improves component selection and pricing.

Cost Management Policies

Formal new product gating checklists should include cost target reviews at each design phase to enforce discipline.

Cost-Focused Design Reviews

Design reviews should analyze cost impact and tradeoffs, not just technical considerations.

IT System Support

PDM/PLM and ERP systems must maintain accurate component and manufacturing process cost data.

Overcoming Roadblocks

Companies can overcome common organizational obstacles to optimizing design-to-cost:

Engineering Mindsets

If engineers are not incentivized or empowered to own cost, they will prioritize solely on functionality and quality.

Lack of Designer Cost Visibility

Making cost data readily visible and democratized enables better design decisions.

Functional Silos

Cross-functional collaboration on cost modeling and tradeoffs is essential.

Insufficient Supplier Engagement

Bringing procurement and suppliers into design decisions can reveal additional savings opportunities.

Limited Designer Cost Training

Many engineers lack formal training in design-for-cost best practices.

Expert Design-to-Cost Tips

Industry experts provide these tips for effective cost management in NPI:

• “Institute design-for-cost reviews separate from general design reviews to provide proper focus.”
• “Leverage parametric CAD models to rapidly simulate component cost tradeoffs.”
• “Develop standard component libraries with cost data to guide designers.”
• “Train engineers on basic financial concepts like profit margins, contribution analysis, and sensitivity analysis.”
• “Require sign-off from procurement and finance on BOMs before design freeze.”
• “Use reference designs, not just datasheets, to make component integration and cost estimation tangible for designers.”
• “Bring in external design-for-cost consultants as needed to supplement internal resources.”

Conclusion

Designing products to meet target BOM and PCB costs requires diligent adherence to DFA principles, continuous cross-functional collaboration, and organizational commitment to cost management. Formalization of cost targets along with DFx tools and policies enables engineers to innovate within budgetary guardrails. By taking a systematic approach, manufacturers can design cost-optimized products from inception to meet profit goals while upholding quality and performance needs.

Frequently Asked Questions

Q: What is the best way to obtain accurate component pricing data to set BOM targets?

A: Early engagement with suppliers to get budgetary pricing on expected volumes is ideal. Also leverage insight from procurement on current price trends.

Q: When should target costs be set in the NPI process?

A: Targets are best set during the concept phase using historical data before design kickoff. This provides guidance to engineers from the outset.

Q: How much margin should be built into initial cost targets?

A: 10-15% margin on top of preliminary estimates is typical to provide cost flexibility during design refinement and supplier negotiations.

Q: What is the benefit of using reference designs for cost reduction?

A: Reference designs based on low-cost commercial components give engineers proven starting points vs. clean-sheet designs.

Q: How can manufacturers best balance cost optimization with quality?

A: Robust design reviews focused on risk assessment, validation testing, and redundancy for critical components. Continuous quality monitoring after production launch.