Product Teardown involves disassembling a product to its component level. Photographs are taken and basic part information is recorded so that others can use the information without having to repeat the tear-down themselves. A bill of material (BOM) is compiled, followed by estimation of component and assembly costs. If more than 1 product is involved, bench-marking can be performed at component and sub system level.
The tear-down process usually generates cost reduction ideas.
The ideas are ranked for saving value and ROI and the best ideas are implemented.
We worked with our Space sector client to reduce cost of a complex space qualified product. The product looks simple on the outside but the reliability required for space makes it’s manufacturing, testing and validation extremely expensive and therefore traditional automotive / aerospace costing approach would not work!
We obtained a sample and stripped the product down to it’s component parts and estimated the cost of each component and all assembly processes. We visited the supplier to understand the cost drivers and developed a specific cost model for this product.
The supplier was using an arbitrary method for allocating overhead costs and our approach was to use ABC costing which is more accurate.
Result: Our estimate showed a 26% cost gap and through several rounds of technical fact-based negotiations we were able to reduce the selling price by 20%.
This was an excellent result because the design / IP is owned by the supplier making it almost impossible to resource to another supplier.