The Overall Electronic Product Life Cycle Cost Model

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The manufacturing costs of products are highly dependent on life cycle stage, as shown in see Figure 6.1. The first stage is called start-up or market development. During this stage, emphasis is on the performance of the product. Features such as speed, capacity, response

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time,and other “bells and whistles’,dominate the product cycles. At this stage, the benefits of the product to the customer are perceived to be very high in increased productivity or personal comfort and satisfaction. The number of competitors is large, since entry into the market is wide open, and a new company can establish a niche in the marketplace for a relatively low investment. Product development during the start-up stage is marked by the intense drive to arrive at the market as early as possible, with minimum concern over manufacturing cost. A good indicator of this stage is the number of wire cuts and changes to printed circuit boards (PCBs) in new products. The quality 

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and reliability of the new product in manufacturing is achieved by extensive inspection and testing.

The second stage is the growth stage. As the marketplace is expanded and general acceptance of the product is assured, the number of competitors drops and the rate of market development begins to slow. The issue is not the acceptance of the technology or the particular use of the product, but the differentiating aspects of the manufacturers. Elements of the long-term cost of ownership of the product such as the quality and field support of the product, the commitment of the manufacturers to the particular business segment, and the growth of ancillary products and services supporting the product and its technology are emphasized. In addition, there is increasing customer confidence in the evolution of the product technology.

Product development during the growth stage is characterized by the focus on introducing the manufacturing guidelines of capabilities and constraints to the new product, and beginning to concentrate on manufacturing as a strategic weapon to achieve low cost and high quality. Coordination with suppliers is increased by the introduction of just-in-time (JIT) schedules into the manufacturing process.

The third stage is the maturity period. This phase is characterized by the emergence of a dominant technology or technique for the product design. At the same time, the relative growth of the market is slowed, being only proportional to the growth of the population or the customer base, as the product saturates the market. The number of manufacturers continues to decrease, as they either go out of business or get bought out by larger companies. The competitive emphasis in this stage is on price and quality, as the dominant technology does not allow too much variation on the basic design of the product.

Product development in the maturity phase is focused on continued improvement in manufacturing processes, such as a stronger emphasis on quality through the tools of control charts, continuous quality improvement, and robust processes. Variability reduction through implementing the techniques of design of experiments (DoE) and heavy emphasis on automating part or all of the manufacturing processes i§ increased. The suppliers for the product are involved early and often and the design process is made more robust through the use of analysis and simulation tools.

The last stage can. take one of two forms: either the product will decline as the need for it is overwhelmed by new technology (as was the case for 8-track cassette players and electric typewriters), or the product will develop into a commodity. In either case, the number of product manufacturers will decline to a select few big companies, and en- try into this market will become very expensive and risky. The emergence of standards of use, manufacture, interconnection, and quality will make price the only competitive factor. The products will essentially be interchangeable from one manufacturer to another, with high customer expectations of quality and reliability. The revenue per unit decreases rapidly, as manufacturing techniques become the major factor in ensuring the long-term survival of the product’s manufacturing company. Follow-on products will be evolutionary, with a market leader establishing a very careful trend that locks on his customer base and provides a definite upgrade path for the new generation of products. The attributes of each stage in the product development life cycle are shown in Table 6.1.

The product development emphasis in the commodity stage is on reducing manufacturing cost while maintaining the high quality expected by the customer. There is a much higher level of automation, as manufacturing knowledge and the stability of the design are increased. Few companies can enter into a market at the commodity stage since costs of recruiting personnel with the required knowledge

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or developing the internal learning curve for the necessary expertise can be prohibitively high.

The electronics industry has followed many other industries into this pattern. The automobile industry is a prime example, In the early part of the last century, there were hundreds of auto manufacturers, and any of the competing technologies could have become dominant: electric, steam, or internal combustion. The computer industry has gone through the stages discussed above for various products. Mainframes have all but disappeared, the personal computers have become a commodity industry, with exchangeable software programs and plug-in PCBs and modules.

This chapter is mainly focused on electronic products in the maturity or commodity stages, since the emphasis is on quality and cost. Maintaining a good level of cost accuracy during the development stage is important in the success of later stages of the life cycle of technological products.



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