After collecting background information, several tracking tools can be used in order to make proper product marketing or financial decisions affecting the cost of the product. Some of these tools are as follows.
• The return factor of the product, which is the total profit (sales revenues minus manufacturing costs) returned by the product during its life cycle (up to 3-5 years), divided by the development costs. This return factor should be compatible with the historical trends of the product family and its competitors, expressed in return on investment (ROI) terms, which is determined by the time-adjusted present worth of the return factor. It should be in the range of 12-18% for typical electronic products. Obviously, this factor is dependent on the expected volume of the product. The volume will change the percentage of each element discussed in Section 6.1.2. In addition, this volume will determine where the product will be manufactured, either in the company’s own facilities or in the global supply chain.
Cost history of the product. The costs of the product can be identified in terms of labor, material, overhead, depreciation on capital, NRE tooling, quality, and administration costs. These costs can be tracked over the design as well as the production phases of the product to show impact of design changes and investment in automation. An example of the cost history of an electronic product based on the concept stage is given in Figure 6.3
• Volume sensitivity of the product. Depending on forecast accuracy and upside potential, several levels of automation and manufacturing strategies can be used to estimate product costs. An example of the volume sensitivity in the typical cost percentages of a consumer electronic product is given in Figure 6.4.