Does Product Design Really Determine 80 of Manufacturing Cost

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Does Product Design Really Determine 80 of Manufacturing Cost
Karl T Ulrich
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Although our cost adjustment procedure is approximate, the hypothesis that cost and price are positively correlated is not supported by our data. Some of the most expensive models have the lowest manufacturing costs, and some of the least expensive models have relatively high manufacturing costs. For example, the Rowenta FG22-0 sells for a feature-adjusted price of $40. 60 (unadjusted price is $49. 99) while we estimated its cost at $5. 92 for a well run plant in a medium-cost environment. The ...Toastmaster sells for a feature-adjusted price of $18. 70 (unadjusted price is $22. 99) while we estimated its cost at $7. 61.
Quality Perhaps there are differences in manufacturing costs arising from differences in product quality. In this context we intend quality to mean durability, reliability, and robustness, because as we have noted, the quality of the coffee made by the models is uniform. There are not many failure modes for coffee makers. Based on interviews with two coffee maker designers, we found that failure of the heating elements due to calcification of the heater tube is the primary failure mode of the product.


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